This years’ markets have certainly seen their fair share of highs and lows, with the FTSE 100 experiencing a maximum drawdown year-to-date that is triple the amount that it was this time last year.
Not only did the index break past the 7,000 mark for the first time, it also fell below 6,000 points for the first time in more than five years later on that year
Price performance of index in 2015
Source: FE Analytics
Nobody can time the markets, of course, so which market occurrences were the financial experts least expecting over the course of the year?
The oil price collapse – take two
Michael Clark (pictured), manager of the Fidelity Moneybuilder Dividend fund, and Darius McDermott, managing director of Chelsea Financial Services, were both surprised at how far the oil price slumped.
Between 2000 and 2008, the oil price saw a significant spike in price as it rocketed from $25 per barrel to almost $150.
After eventually managing to recover and creep back up to more than $100 following a severe bruising from the financial crisis, it began dropping again in 2014, and this pricing pattern eventually snowballed until it more than halved to below $50 in January this year. Currently, oil stands at less than $36 per barrel.
“I was surprised by how much oil came down,” Clark said. “If you just take stock of where the market is today at the end of 2015, we’ve had another disappointing year for the market as a whole. Throughout 2014 and 2015, there has been basically zero per cent total return.”
“The FTSE All Share’s long-run return is 9.5 per cent per year, that’s a 30-year compound return and that’s nominal. If you take the inflation off it’s about 6.5.”
“That’s a more normal kind of return, and the reason why it’s been weak recently is because commodities and oil have come down so much.”
Performance of indices in 2015
Source: FE Analytics
However, if these sectors manage to stabilise, the manager believes 2016 could be a much better year for markets as a whole.
McDermott added: “The continued oil price weakness was certainly a surprise and the continued weakness of commodities was a big factor for emerging markets as well as for the FTSE 100, which has a large weighting in commodity stocks.”
The US Federal Reserve’s dithering
Another factor that the managing director was surprised about this year was the fact that the US Federal Reserve (the Fed) didn’t raise interest rates until the very end of the year.
“It’s fair to say the continual lack of interest rate cycle progression has been a bit dull, really. We’ve been calling it ‘Fed fatigue’ as everyone thought they were going to rise in September and they didn’t, then they finally got round to it last night,” McDermott said.
Ian Kernohan, economist at Royal London Asset Management, was also surprised that the Federal Reserve hiked rates so late in the year, and at the start of the year actually expected them to raise rates twice by the end of 2015.
He also said that while US growth has been fairly similar to his expectations, inflation in the region has transpired to be lower than he anticipated.
“We expected an overall GDP growth in the US of 3 per cent at the start of the year and it’s going to be 2.5 per cent at the end of the year. We put this down to a very weak first quarter this year as a result of the very severe winter the US had,” Kernohan said.
“Inflation has been lower than we expected and of course the Fed has hiked a bit later than expected.”
On the opposite end of the spectrum, the economist was surprised at the rate of growth that has come from Europe since the start of the year.
“Expectations for European growth for the year were quite modest initially, and I would say it’s the one big area where we’ve seen some upside surprise in terms of growth,” he added.
No real value whatsoever 
Aside from regional expectations, many investors have been surprised about the lack of value available in markets, due to expensive valuations across some assets and precarious balance sheets in others.
In an article published earlier this month, Investec’s Alastair Mundy (pictured), who is the head of the firm’s value team, said that we are currently in “value hell” as there are too many headwinds in the market to take high-conviction bets on underperforming stocks.
Performance of indices in 2015
Source: FE Analytics
“I don’t think I’m saying anything particularly weird when I discuss my bear argument, but then I look at other people’s portfolios and they look nothing like mine. I think in general, everyone’s got their fingers crossed hoping that everything is going to be okay,” he said.
Alan Custis, head of UK equities at Lazard, says that the distinct lack of recovery in underperforming stocks has taken him by surprise this year, and says that this is the first year he hasn’t seen investors attempt to identify the stocks that have disappointed them and whether there is any value left in them.
“We’ve been joking that bad news has a P/E of about 20 at the moment and good news has a P/E of one - it’s interesting that when stocks disappoint they don’t recover,” he said.
“Underperforming stocks have fallen again and again and then they tend to carry on falling, which I think is a bit of a new phenomenon, whether that’s because there are more momentum-based investors in the market that are active these days I don’t know.”
“It interests us because it’s a phenomena which ultimately could throw up some interesting opportunities. It’s the sign of a market that’s not prepared to give anyone the benefit of the doubt. As we go into the New Year hopefully that may change, otherwise it becomes an increasingly narrow market.”
