The 2019 investment year

2020 begins with a reasonable investment outlook. Is it worth selling shares to realise 2019 gains? Check with your financial adviser about investing in ISAs and pensions before the tax year ends.

The world’s share markets enjoyed strong rises in 2019.

Index2019 Change
FTSE 100+12.1%
FTSE All-Share+14.2%
Dow Jones Industrial+22.3%
Standard & Poor’s 500+28.88%
Nikkei 225+18.2%
Euro Stoxx 50 (€)+24.8%
Shanghai Composite+22.3%
MSCI Emerging Markets (£)+11.0%

2019 was a very different year for investors from 2018. Whereas 2018 saw a pattern of losses across all major markets, 2019 was the exact opposite: the red numbers that marked a year of negative performance in 2018 were replaced by black. A good global example of this was the MSCI ACWI, a broad global index covering both developed and emerging stock markets. In sterling terms, this index fell by 5.66% in 2018, but rose by 19.26% in 2019.

Despite all the trauma of Brexit politics during the year, the UK stock market posted double digit returns, as the table shows. Along with other major markets, the UK benefitted from starting at a relatively low level, following a sharp fall in the final quarter of 2018.

A point hidden in the index numbers is the performance of mid-sized UK companies – those in the FTSE 250, which sit below the top tier of FTSE 100. The strength of sterling during the year (up 4% against the US dollar and nearly 6% against the euro) had a greater impact on the multinational members of the FTSE 100 than the more domestically focused FTSE 250 constituents. The end result was that the FTSE 250 rose by 25%, more than double the increase in the FTSE 100.

The good performance of the pound – the opposite of 2018 – also took a slight edge off the returns from overseas markets for sterling-based investors. However, as the performance of the MSCI ACWI shows, in overall terms 2019 still offered greater profits for those who invested overseas.

2020 starts off with a reasonable investment outlook. The UK is now past its era of Brexit wrangles – at least until the EU trade negotiations begin in earnest. Meanwhile the US and China have just about agreed the first stage of a trade deal and interest rates remain at rock bottom levels, with few pundits expecting any move upwards in the year.

Against that backdrop, it may seem odd to suggest investors should consider selling, but as the tax year end nears, it could be worth realising some of those 2019 gains to take advantage of your £12,000 capital gains tax (CGT) exemption and reinvesting the proceeds – even perhaps in the same funds – via an ISA or a pension.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.