Another year of turbulence in the eurozone, a slowdown in the powerhouse Chinese economy and fears the United States will go over its ‘fiscal cliff’ failed to stop markets coming out on top this year.
London’s blue-chip index, the FTSE 100 Index, is currently 7 per cent higher than at the start of the year and has come close to the 6000 barrier in recent weeks.
But its understudy, the second-tier FTSE 250 Index, has been the star performer of 2012, reaching a record high after rising nearly 23 per cent so far this year.
The headline rises, however, mask periods of panic in the markets amid ugly economic conditions and, at times, political stalemate.
In May, £80bn was wiped from the value of London’s leading share index in just one week when Moody’s Investor Service downgraded 16 Spanish lenders, including the UK arm of Banco Santander.
Investors were spooked by the prospect of a multibillion-euro bailout for Spain after the yield on 10-year bonds neared the levels which pushed Greece, Portugal and Ireland into taking financial support from the EU.
But apocalyptic fears for the eurozone have subsided in recent months and investors have become more optimistic after the European Central Bank (ECB) unveiled a bond-buying rescue plan in September.
Fears of a so-called ‘Grexit’ from the euro were also calmed as billions of euros of bailout loans to prevent Greece from going bankrupt were approved this year.
Michael Hewson, senior market analyst at CMC Markets, said: “EU leaders have looked down the barrel and seen that having Greece in the euro is the lesser of two evils, particularly with German elections in September.”
With talk of a eurozone break-up calmed, investors have turned their attention across the Atlantic.
In September, the FTSE 100 Index soared to its highest level in six months, after the US Federal Reserve unveiled a third round of quantitative easing, worth $40bn (£25bn) a month.
Trading was put on hold for a short time in October when America’s two biggest trading platforms – the New York Stock Exchange and the Nasdaq Stock Market – were closed amid safety concerns when Hurricane Sandy hit the US east coast.
But in recent weeks London and world markets have become increasingly nervous as the US nears its fiscal cliff of automatic spending cuts and tax rises.