Tag Archive: FTSE 100

  1. A tough year for UK Shares

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    The FTSE 100 ended the year down 12.5%, its worst performance in 10 years. Few sectors or, for that matter, global markets, avoided a decline.

    The FTSE 100 in 2018
    The FTSE 100 ended 2018 12.5% down from where it started, having failed to spend much time above its 7,687.8 starting level. This year’s roller coaster ride into Christmas did not help but, as the graph above shows, the market was mostly heading down from late May onwards.

    In 2018 the FTSE 100 outperformed its FTSE 250 counterpart, helped by the large-cap index’s bias towards multinational companies. Sterling fell by nearly 6% against the US dollar over the year, although its decline against the euro was only 1.1%. The table below summarises the movements of the main FTSE indices.

    Index Change Comment
    FTSE 100 -12.5% A widespread decline
    FTSE 250 -15.6% UK focussed cos underperform Footsie
    FTSE Small Cap -12.4% Small caps beat mid cap but only match big-cap
    FTSE 350 Higher Yield   -13.9% Value-investing offered no escape
    FTSE 350 Lower Yield -12.0% Growth did little better than value
    FTSE All-Share -13.0% Underperformed Footsie due to mid caps
    FTSE Tech Hardware +34.2% Top sector: only three constituents
    FTSE Tobacco -44.9% Bottom sector: BAT was biggest Footsie faller

    Over the year, the dividend yield on the FTSE All-Share rose from 3.59% to 4.46%, implying dividend growth of 8.1%. However, as last year, this figure needs to be treated with caution because the poor performance of sterling will once again have boosted the value of the dollar-denominated distributions from the heavyweight dividend payer likes of BP, HSBC and Shell.

    The rise in the equity dividend yield contrasted with a 0.1% drop in the 10-year gilt yield which ended 2018 at just 1.14%. Two-year gilt yields, more sensitive to base rate than their longer brethren, rose from 0.49% to 0.75%, almost perfectly matching the 0.25% increase in the base rate over the year.

    The performance of the UK equity market appears below the global average. In sterling terms, the MSCI World was down 4.9%. However, that worldwide performance was helped by the relatively strong (but still negative) US market: the MSCI World ex USA recorded a fall of 11.2%.

    In the emerging markets, outside Brazil, investors returns were mostly in the red: The MSCI Emerging Markets Index was down 11.5% in sterling terms. The blight of the index reform also struck – in the year MSCI added mainland China to its EM indices, the country’s stock markets had a hard time – the Shanghai Composite ended down almost 25%.

    In 2017, the Footsie closed the year at an all-time high of 7,687.77, having never fallen below 7,100. However, 2018 marked a return to a less benign environment, not only in the 12-month return figure, but also with the re-emergence of volatility. With a yet undetermined form of Brexit theoretically less than three months away, 2019 could be an equally ‘interesting’ ride. The one potential redeeming feature is dividend yield, which is close to a nine-year high and nearly twice covered by earnings.

  2. FTSE 100 Review

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    The FTSE 100 has undergone its latest quarterly review.

    FTSE Russell, the providers of the FTSE 100 and related UK indices, has announced the results of its quarterly review.  This was based on market values on 28th November and will take effect from Monday 18th December.

    As far as the FTSE 100 is concerned, there are three exits and three entries:

    Going out…
    ConvaTec Group, is a healthcare group focused on wound care, continence and critical care and infusion devices. In mid-October it issued a profit warning which prompted a near 25% drop in the share price. That was enough to put ConvaTec’s position in the Footsie at risk. The share price did not recover from the warning, leaving the inevitable to happen.

    Merlin Entertainments runs Madame Tussauds, Legoland Parks and a variety of other theme parks. Its share suffered a downward rollercoaster experience in October when it revealed “difficult” summer trading because of terror attacks and unfavourable weather.  After falling nearly 20%, the shares have drifted down further, following a similar pattern to ConvaTec. At current levels, the market punishes bad news.

    Babcock International Group is a support services company with an emphasis on defence industries.  Support services have been out of favour (think Capita, Carillion). Its half year results in November were in line with forecasts, but highlighted issues that were holding back revenue growth, giving the share price a Footsie-fatal second leg down.

    Coming in…
    Just Eat will be a familiar name to many. Floated only 3 years ago, Just Eat dominates mass market takeaway internet ordering, although unlike its rivals, such as Deliveroo, it makes no deliveries itself. Just Eat has grown dominant by buying out much of the competition. Its growth comes at a rich share price – the price/earnings ratio is over 50 and so far, there is no dividend.

    Ironically, at the same time as Just Eat moved into the Footsie, Restaurant Group (whose brands include Frankie & Benny’s, Garfunkel’s, Joe’s Kitchen, etc) was ejected from the FTSE 250.

    Smith (DS), is a packaging specialist, with an innovative line in corrugated paper. It has grown as its competitors have fallen by the wayside, making acquisitions en route. Ultimately its business is about cardboard boxes, but there remains plenty of demand for them – just think of all those Amazon deliveries…

    Halma is the sort of business that generates a “Who?” response. It produces safety, health and environmental equipment and has been on a roll since announcing “widespread growth” in a September trading update, followed by good half year results in November.

    The arrival of Just Eat is a reminder that technology can produce rapidly growing companies outside the USA.

     

  3. Half Way Point of 2017 Check In

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    The first half of 2017 is over, where did that time go!  The last 6-months marked the end of another politically turbulent period in the UK. The view across the six months belies the upheaval that took place: the most widely quoted yardstick of the UK stock market, the FTSE 100, nudged up a little under 2.5%. Elsewhere, there were some sharper movement, as the table below shows

     

    30/12/2016

    30/06/2017

    Change in H1 2017

    FTSE 100

     7,142.84

     7,312.72

    2.38%

    FTSE 250

     18,077.27

     19,340.15

    6.99%

    FTSE 350 Higher Yield

     3,753.53

     3,768.50

    0.40%

    FTSE 350 Lower Yield

     3,709.13

     3,953.53

    6.59%

    FTSE All-Share

     3,873.22

     4,002.18

    3.33%

    S&P 500

     2,238.83  2,423.41

    8.24%

    Euro Stoxx 50 (€)

     3,290.52

     3,441.88

    4.60%

    Nikkei 225

     19,114.37  18,909.26

    -1.07%

    Shanghai Composite

     3,103.64  3,222.60

    3.83%

    MSCI Emerg Markets (£)

     1,305.65  1,455.96

    11.51%

    UK Bank base rate

    0.25%

    0.25%

     

    US Fed funds rate

    0.50%-0.75%

    1.00%-1.25%

     

    ECB base rate

    0.00%

    0.00%

     

    2 yr UK Gilt yield

    0.11%

    0.37%

     
    10 yr UK Gilt yield

    1.24%

    1.33%

     
    2 yr US T-bond yield

    1.16%

    1.38%

     
    10 yr US T-bond yield

    2.46%

    2.28%

     

    2 yr German Bund Yield

    -0.79%

    -0.57%

     

    10 yr German Bund Yield

    0.11%

    0.47%

     

    £/$

     1.2357  1.2990

    5.12%

    £/€

     1.1715  1.1389

    -2.78%

    £/¥

     144.1202  145.9505

    1.27%

    Brent Crude ($)

     56.75

     48.99

    -13.67%

    Gold ($)

     1,156.40

     1,242.25

    7.42%

    Iron Ore ($)

     79.65

     63.00

    -20.90%

    Copper ($)

     5,500.00

     5,954.50

    8.26%

    A few points to note from this table are:

    • The US market performed better than the UK, helped by the continued strength in a small number of big cap technology stocks. However, for UK investors on this occasion the dollar worked against them as it fell 4.9% against sterling over the period. The demise of the dollar can be blamed partly on fading expectations that a Trump bump would lead to a rapid rise in US interest rates
    • The FTSE 250, regarded as a better yardstick for UK plc (although still with a significant weighting of overseas revenues), was more resilient. The FTSE 250 breached 20,000 for the first time in May. However, it too succumbed after the election. With the FTSE 250 achieving almost 7% growth in the six months, the result has been that the FTSE All-Share (roughly 80/20 FTSE 100/FTSE 250) outperformed the FTSE 100 by almost 1%.
    • The FTSE 100 has been on a rollercoaster, peaking at 7,377 in mid-January, dropping to 7,099 by the end of the month, then rallying back up to 7,430 by mid-March before diving to 7,114 in mid-April (on the election announcement). Thereafter it rose again to 7,548 in early June on opinion poll optimism, with an inter-day high almost breaching 7,600 before descending in the wake of the voting reality.
    • Against the backdrop of the Eurozone’s continued monetary stimulus, the euro strengthened and continental stock markets posted a positive return. Some of that was down to political clouds clearing in the Netherlands and France as populists failed to gain power.
    • Bond yields headed upwards over the first half, except for 10 year US Treasuries. The Federal Reserve put through two rate rises, with a third likely after summer. In the UK, the June vote of the Monetary Policy Committee suggested that a UK interest rate rise may be nearer than had been expected. Statements from Mark Carney and Andy Haldane, the Bank of England’s chief economist, have spread uncertainty. For now, the notion that there will be no move in the UK until 2019 has been largely abandoned.
    • Commodities had a mixed first half, with gold responding to the dollar’s weakness. The most notable change was in the price of Brent Crude, which sunk back below $50 despite OPEC’s decision to continue production limits.

    A look at these six-month figures is a reminder of just how much day-to-day noise can hide what is – or is not – happening to investment returns.

     

  4. The FTSE 100

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    The FTSE 100 – the “Footsie” – is the UK stock market index which garners most of the headlines. It was launched on 31 December 1983 with a base value of 1,000. Today it is about 7,550, which equates to an average annual return (excluding dividends) of 6.2%.  RPI inflation over the same period averaged 3.5% a year.

    Two years after the FTSE 100 was launched, the FTSE 250 came on the scene to cover the 250 UK listed shares below the Footsie’s 100 large cap constituents. The FTSE 250’s base figure was 1,412.60, a number chosen to match the level of the FTSE 100 at the end of 1985. Last week the FTSE 250 broke through the 20,000 level for the first time.

    What looks like a massive outperformance, is not quite so great when subjected to the power of compound interest. The average annual return (again excluding dividends) comes to 8.8% whereas the Footsie over the same period achieved 5.5% (those first two pre-FTSE 250 years were good ones). Inflation from the end of 1985 comes in virtually unchanged at an average of 3.4%.

    The outperformance of the FTSE 250 is not quite as great as it seems because the constituents of the FTSE 100 have generally delivered a higher dividend yield (the FTSE 100 currently yields 3.66% whereas the FTSE 250 offers 2.64%). However, overall there is no denying that the FTSE 250 has trounced its larger counterpart. Look at the long-term graphs and the outperformance turns out to be something of a roller coaster:

    • The two indices performed quite similarly until 2003: on 7 March of that year the FTSE 100 hit a low of around 3,492 while the FTSE fell to 3,890 (11.4% higher).
    • By June 2007, just as the financial crisis was about to hit, the FTSE 250 peaked at 12,197, 81% higher than the FTSE 100’s 6,732.
    • The FTSE 250 took a big dive in 2007/08, bottoming out at 5,492 in November 2008, a decline of 55%. The FTSE 100 took longer to find its low of 3,531 in March 2009, down 48% from its peak. That low coincided with a figure of 5,831 for the FTSE 250, 65% higher than the FTSE 100.
    • Since that 2009 nadir the FTSE 100 has risen by 114%, whereas the FTSE 250 is up 243%.

    Some of the difference in performance is down to the different companies in the two indices. For example, the FTSE 100 has suffered from its exposure to commodities and energy (18.1% against 6.8% currently). A sector breakdown of the industrial sectors of the two indices can be found here. There may also be an effect that, as the top index, the Footsie’s constituents can look like companies that have reached the end of the small/medium company growth stages. 

    Comment

    The graphs can be rather misleading. Unless they are log-scale, a jump from 10,000 to 20,000 looks much more impressive than 3,500 to 7,000, even though both represent a doubling. On a price/earnings ratio basis the FTSE 100 is more expensive (30.04 v 22.46), but that is largely because the figures are historic, capturing the miserable performance of that all-important commodity sector in the last financial year. In terms of five-year volatility, the two indices were identical to the end of April according to FTSE Russell.

    Whether or not you view the FTSE 250 to be in bubble territory, its progress since 2009 is a useful reminder that there has been plenty of scope to outperform the main market index.

    For more information on the FTSE 100 or any other Financial Planning queries please call 01793 771093

  5. The Markets

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    You may be enjoying the economic benefits of petrol prices around £1.10 a litre, but last week investors were skeptical about the effect of low, low oil prices on companies’ performance during 2015. (more…)

  6. The Markets

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    Time to take a longer view of your investment returns I think. The papers seem to be full of pundits predicting that “the end is nigh” for stock market valuations at their current level. The auguries being cited seem to cover everything from the black arts of the Chartists, through to references to the “hallowed investment gurus” whom you are not able to criticise. From crossed graph lines to the interpretation of “Buffetery”, I am sure someone will soon be referencing the rooks flying over the City before long. So yes there will be a stock market pull back or even crash – but when nobody, of course, actually knows. When it happens there will be no doubt one who called it right, but that will be likely to be amongst the very few and the very lucky. The real question is actually – does it matter? (more…)

  7. The Markets

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    It’s a little early for Halloween, but markets sure got spooked last week. After a 28-month ride to September highs, stock markets jolted and shook investors last week like the most dramatic and scream-inducing rollercoaster at an amusement park’s fright night. (more…)

  8. The Markets

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    The FTSE 100 hit a three-week high after getting a morning boost from a strong overnight performance in Asian markets, despite disappointing Japanese GDP figures. The index closed up 72.38, or 1.09pc, to 6736 points as afternoon trading tracked steadily upwards, free from any US wobbles as the New York markets were closed for Presidents’ Day. (more…)

  9. The Markets

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    Happy New Year!

    Traders are toasting the strongest year for the FTSE 100 since 2009 following a bumper crop of new entrants to the stock market. (more…)

  10. The Markets

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    If ever you wanted some proof of the global nature of the FTSE 100, then a couple of sharp reminders have been recently administered. That great, reliable Anglo-Dutch stock and stalwart of the FTSE, Unilever, was given a bashing last week; not because its products have gone wrong, after all Dove Soap, Flora and Knorr Stock cubes are still household staples. No, this time it is the effect of the emerging markets where their global and regional brands have been affected by the recent fall off in many emerging and developing national currencies.

    (more…)