Tag Archive: FTSE

  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. The Markets so far in 2018

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    The third quarter of 2018 is over. Returns have been mixed, with the USA the standout performer.

    For markets it has been an interesting nine months, with a fair slice of performance – good and bad – down to what has been happening in the USA, but what else would one expect with it being about 52% of the world market cap. The country has experienced three hikes in interest rates (with another still earmarked for December). On this side of the Atlantic, the Brexit process has rumbled on with no clear end yet in sight, while the Eurozone ended September with a renewed round of jitters about the financial profligacy of Italy’s populist government.

    Looking more broadly, the nine-month out turns are shown below:



    YTD Change

    FTSE 100




    FTSE 250




    FTSE 350 Higher Yield




    FTSE 350 Lower Yield




    FTSE All-Share




    S&P 500




    Euro Stoxx 50 (€)




    Nikkei 225




    MSCI Em Markets (£)




    MSCI ACWI (£)




    2-yr UK Gilt yield



    10-yr UK Gilt yield



    20yr US T-bond yield



    10-yr US T-bond yield



    2-yr German Bund yield



    10-yr German Bund yield















    UK Bank base rate



    US Fed funds rate



    ECB base rate



    A few points to note from this table are:

    • The FTSE 100 has been on a rollercoaster ending up slightly short of where it started the year. Add in dividends – the yield on the FTSE 100 is now 4.01% – and the market produced a small positive total return.
    • The FTSE 250, regarded as a better yardstick for UK plc (although still with a weighting of overseas revenues of around 50%), has performed much the same as its FTSE 100 multinational counterpart. The problems of the retail sector have continued, along with Brexit uncertainties.
    • The US market performed strongly, helped by tax cuts and rising revenues. Rising interest rates and the vagaries of Donald Trump economic ‘policies’ seem to have passed the market by, witness the longest ever bull run for the S&P 500 recorded recently.
    • The Eurozone economies showed signs of losing momentum, with politics casting a cloud in Italy.
    • Emerging markets were the worst performers hit, as earlier in the year, by the rising US dollar and interest rates, with the most obvious victims once again Turkey and Argentina.
    • Bond yields have headed upwards over 2018 in the UK and US but remained flat in the Eurozone (excluding Italy). A fourth US rate rise is expected in December, with the next UK increase possible in February unless the inflation numbers improve and/or Brexit talks break down. The yield on 10-year US Treasury Bonds appears to be settling above 3% and is still close enough to the 2.7% 2-year bond number to keep some pundits watching for an inversion of the yield curve, followed by a recession.
  3. The Markets

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    One of these things is not like the other… If you find yourself humming that old Sesame Street standard when you think about financial markets and world economies, you’re probably not alone.


  4. The Markets

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    The second quarter offered a level of drama often found in homes with teenagers. 

    When investors realised their good friend, quantitative easing, might have an earlier-than-expected curfew in the US, they threw a hissy fit that resounded through global markets. The outburst interrupted the trajectory of FTSE and the Standard & Poor’s 500 Index, which finished June lower after hitting highs in May. As stocks fell, yields on the benchmark 10-year government bonds hit a high.


  5. Market Update

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    If anyone doubted the power of Twitter, their skepticism was laid to rest this week. Early Tuesday afternoon, a tweet from the Associated Press reported President Obama had been injured by explosions in the White House. Stock, bond, and commodity markets fell sharply on the news and then rebounded when the Associated Press communicated that its Twitter account had been hacked. This wasn’t the first time such a thing had happened on Twitter or the first time false and market moving information had been posted. In February, the stocks of Burger King and Jeep moved after a post on each company’s Twitter account indicated the company had been sold to a rival firm. The lesson to take from these events? Everyone may want to be wary about buying or selling investments based on news reported through Twitter or any other social media feeds.


  6. Market Update

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    It was a wild, wild week. 

    Last Monday, bombs exploded near the finish of the Boston Marathon. Not long after, media outlets let the public know letters to President Obama and a senator from Mississippi contained the poison ricin. On Wednesday, the town of West, Texas was flattened by an explosion at a fertilizer plant. By the end of the week, a man had been arrested for sending the ricin letters, the city of Boston had been locked down, the bombing suspects had been captured, and folks were returning to their homes in West, Texas.


  7. Market Update

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    Lexington were delighted to see that U.K. stock markets finished the week – and the quarter – on a positive note!

    The U.S. Federal Reserve’s accommodative monetary policy and strong profit growth helped provide the lift needed to propel the FTSE 100 to a 5-year high. The U.S. Dow Jones Industrials Index also finished the week above its previous record close. For the quarter, the FTSE 100 was up about 9 percent, the FTSE Small-Cap index was up about 11.3 percent, and the FTSE AIM index was up about 3.4 percent.