What a difference a year makes on money markets


It’s a year this week since the FTSE 100 – the stock market index of the UK’s biggest companies – hit a six year low of 3512.


At the time, financial markets around the world appeared to be in meltdown, fuelled by poor economic data and the seismic events of the previous six months when some banks came close to collapse. There was certainly a lot of panic, and nobody quite seemed to know how bad it could get.


Since then the FTSE 100 has risen by over 50 per cent, and has been trading above the more healthy 5000 mark since September 2009. Towards the end of last month it was buoyed by a number of encouraging financial announcements, most notably in the banking sector where Barclays announced record profits.


I point this out because it’s only when you look back you realise how big a mess we were in back then, how uncertain we were of our financial futures, and also how far we’ve come in 12-months. If someone would have told me then that by the end of that year, the markets would be back up to where they are now I’m not sure I would have believed them.


Ok, everything still isn’t rosy in the garden. The recovery is expected to be a long one, unemployment is still rising, and there are more choppy waters ahead as Government looks to bring under control our huge budget deficit.


But, on the positive side, our banks are becoming more stable (even if they are more risk averse as a result), there is growth in some areas of the economy, most notably in manufacturing, and small signs of returning confidence in the housing market.


It would be great to have a crystal ball to see where we will be in another year from now and know if the recovery really has begun to take a firmer hold. In the meantime, we must all maintain what we’ve done over the last 12-months, being bold and getting on with the job.


Again it will be the FTSE 100 that will give us a good indication of where we are then, as the financial markets are generally a good barometer for the health of the economy.


Investors will also be hoping the FTSE 100 continues to perform well. Many savers are turning to the markets in the hope of boosting their income as current interest rates continue to give poorer returns on more traditional savings such as ISAs.


It’s important though that we don’t pin all our hopes on the health of the financial markets. On the ground here in Preston it will be the determination, hard work and entrepreneurial spirit that will make the real difference to our economic fortunes.