Usually, picking the winners and losers of a calendar year is a tough task.
Not for 2014, though. The horrendous market performance from oil, Russia’s rouble and bitcoin ensured that they breezed to the dubious position amongst the year’s worst investments.
The reasons for each asset’s demise are varied and complex. But a glut of supply and drop in demand hardly helped oil’s value, which in turn combined with sanctions to drag Russia into trouble. For bitcoin, a swathe of negative revelations – kicking off with the demise of Mt. Gox – triggered mass uncertainty over legitimacy. Increased usage and a few high profile merchants announcing that they would start accepting the cryptocurrency failed to turn its fortunes around.
But adversity often breeds opportunity and Opec nations, Russian finance figures and bitcoin backers all remain vociferous in their belief that rosier times are ahead. Is there a reason for their optimism?
One contrarian investment strategy that has worked in the UK is to back the worst performing companies on the FTSE 350 at the start of the year. Most of the time – with some notable exceptions – those companies will end up beating their index by the end of the first quarter.
Tesco have certainly started the year with the intention of fulfilling this trend. As the FTSE 350 has sagged slightly since January 1st, Tesco’s share value has increased over 15% as Dave Lewis’ turnaround plan has impressed the markets. Other supermarkets are following Tesco’s lead, so one sector that lead the FTSE downwards in 2014 is performing well.
But does the trend work when applied to a wider picture? In forex automated trading, 2013’s worst performing currencies were the Japanese yen and South African rand, which both dropped over 20% against the dollar over the course of the year. In commodities, that dubious honour went to corn. A record harvest in the US led to quashed prices across several agricultural commodities, and corn came off worst.
Overall, the news is mixed for those who are still long on the rouble, bitcoin or oil. Both the yen and the rand performed significantly better last year than in 2013. The dollar, though, had a particularly strong year off of the back of a US economic recovery that began outstripping other economies. For that reason, the rand’s turnaround only amounts to a loss of just 10% for the year: an improvement but still not profit. For the yen, losses were cut to 14% for the year.
Corn’s volatile trajectory downwards continued, once again at a slower pace but with little to recommend it to investors. All in all, looking at the trend for 2013, there is little cause for optimism in this year.
That picture appears to be borne out in bitcoin, which at one point on January 14 was facing losses of over 40% in just two weeks. Oil, too, was down around 12% after two weeks of 2015.
While the rouble is still moving down against the dollar – and the dollar’s strength is showing little sign of abating– there is hope. The plight of the eurozone has brought the rouble back into contention, and the Swiss National Bank’s decision to shock the markets briefly has raised the rouble against the euro.
2015 looks set to be massively unpredictable. In such a volatile climate it would be foolish to write off bitcoin, the rouble or oil as investments yet.
Spread bets and CFDs are leveraged products and can result in losses that exceed your deposits. The value of shares, ETFs and ETCs bought through a stockbroking account can fall as well as rise, which could mean getting back less than you originally put in.
——————
About the Author:
Debbie Fletcher is an enthusiastic, experienced writer who has written for a range of different magazines and news publications over the years.
