In terms of politics, we have a UK election to consider in May and with the political environment so volatile, it is very difficult to predict the result. Whilst many in the City may feel more comfortable with a Conservative Government majority or Conservative led coalition, this brings a referendum on Europe even closer which has the potential to blow a hurricane through financial markets.
In economic terms, the UK looks to be outperforming most of its competitors. However, with our biggest trading partner, Continental Europe, struggling to grow, continued growth cannot be taken for granted.
Looking ahead, we currently see five large sectors, which make up 38% of the FTSE All-Share index, where various issues have made it difficult to invest with confidence. These sectors are miners (China risks), oil (oil price concerns), banks (litigation/regulation), utilities (political risk) and food retail (falling profitability).
This means that 2015 is all about selecting the right stocks. We think that investors will not go too far wrong by staying close to the consumer. The ASDA Income Tracker shows that UK household expenditure is in good shape, driven by falling unemployment, falling food prices and falling fuel prices. I believe these trends will continue into 2015. A pick up in real wage growth could mean that consumers will have around 5% more discretionary income to spend than 2014.
In this context, non- food retailers (such as Marks and Spencer and Debenhams) look well placed. Travel companies (National Express and Tui Travel) look interesting as beneficiaries of the strong consumer and the falling oil price. Finally, with interest rates expecting to stay low for a long time, big and reliable dividend yielders like Phoenix, Sirius Real Estate and HSBC should perform well.