Past year has been a game of two halves
THIS year has been a tough one for investors. At the time of writing, the FTSE All-Share Index is down
12.8 per cent and European and US bourses are struggling too.
But that’s just a function of the past couple of months. Markets were actually performing reasonably well earlier in the year. It was only in October they started to fall sharply. Donald Trump’s fractious relationship with China has upset global markets, while the UK’s chief tormentors have been a falling oil price and the increasing likelihood of a no-deal Brexit.
Extra oil supply coming online from US shale operators means Opec’s grip on the price is slipping, and the result has been a decreasing oil price. The size of firms like BP and Shell mean the UK market is heavily exposed to the black stuff.
As for Brexit, a lack of progress means businesses are still none the wiser as to what the UK’s future relationship with the EU will look like.
Regardless of whether you believe the gloomy predictions for the economy or think it’s Project Fear part II, the uncertainty is spooking markets. Political unrest means a change in government is still not out of the question either.
As a result, economically sensitive businesses like UK banks and housebuilders have been given the cold shoulder by investors. We’ve also seen shares in the retail sector tumble, as consumers tighten the purse strings. Still, it’s not been all doom and gloom. Ocado shareholders have enjoyed a fantastic year. The share price has nigh on doubled as the online supermarket signed significant deals to license out its technology to overseas grocers, most notably Kroger in the US.
Pharmaceutical giants have also performed well, no doubt in part because it’s a defensive sector which isn’t reliant on discretionary spending. That means they offer some protection if the global economy takes a turn for the worse.
While 2018 has been turbulent, investors shouldn’t forget the UK market has an excellent track record. There will be ups and downs, but we still think it remains one of the best options for anyone looking to grow their wealth over the long term. “This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you should seek advice. Shares can rise and fall in value so you could get back less than you invest.”