Blue-chip stocks are on course for their first losing year since the 2011 eurozone crisis, confounding the predictions of experts a year ago, when most expected the FTSE 100 to break through 7,000.
But while indices across the Atlantic have hit new highs this year, with the Dow passing 18,000 for the first time, the total value of the largest 100 companies listed in London has fallen by £40bn, from £1.88 trillion at the start of the year to £1.84 trillion now.
The index hit a 14-year high of 6,904.9 in September, but displayed its exposure to the commodity markets as it slumped in the autumn amid worries over global growth and the oil price. The FTSE 100, which closed at 6,608.48 on Christmas Eve, has just two and a half trading days between now and the new year.
The City pundit David Buik said: “At the start of 2014, with a gargantuan slew of floats in the pipeline, who would have thought that a dramatic fall in commodity and oil prices, aided and abetted by the naive management of some supermarkets, could have been so successful in attempting to spoil the party?”
Forecasters are far less bullish for 2015 as election uncertainty in the UK and the oil price collapse overshadow the stock market.
A year on the footsie
The winners …
Dixons Carphone, the tech behemoth, looks set to take the blue-chip crown with a 71 per cent rise over the year. TV sales ahead of the World Cup and a frenzied shopping spree before Christmas helped it to post a 30 per cent rise in interim profits. Another boost to the £5bn group’s share price came in September, a month after the merger of the mobile phone chain and the Currys/PC World owner, when rival Phones 4U called in administrators.
The US government scuppered Shire’s $54bn (£35bn) merger with rival US drugs maker AbbVie in October by calling a halt to “tax inversion” deals that allow US firms to cut their tax bills. But the failure did yield a $1.6bn break-up fee for the UK-listed Shire and record quarterly results shortly afterwards helped to reassure investors, leaving it up 57 per cent on the year so far.
Despite an up-and-down year for flotations, the London Stock Exchange’s shares gained 40 per cent as it moved further into data provision, splashing out $2.7bn on the US indices group Russell. Nearly a third of the bourse’s business will now come from the US.
… and the losers
Slumping oil prices and the supermarket price war have left grocers and oil explorers vying for the wooden spoon on the FTSE 100 this year.
Sainsbury’s and Morrisons are down more than 30 per cent, but Tesco has managed to outdo its rivals with a 44 per cent drop, after revealing a “black hole” in its accounts in September.
However, it looks set to be saved from the bottom slot by Tullow Oil, which is nursing a 50 per cent fall in its share price, almost identical to the drop in the Brent crude benchmark since June. The oil and gas explorer has in recent years made discoveries off the west and east coasts of Africa, as well as onshore in Kenya, and now needs to invest to ramp up production.
Political turmoil added to problems at fellow oil and gas producer BG Group in Egypt, where a slump in production prompted it to abandon its forecasts, followed in short order by its chief executive. News that Statoil’s respected chief executive Helge Lund will be arriving from Norway to take the helm next year was tempered by the revelation of his £14m pay offer, which was hurriedly revised down to avert a shareholder revolt.
Simon Bragg, chairman & CEO, Stiefel Europe: We will see large swings but equities still offer value
6,200 FTSE prediction
We are entering 2015 with much more perceived risk than we entered the past year. There remain considerable global and domestic geopolitical and economic worries, as the collapse in energy prices and the recent slump in the rouble have shown.
These concerns will continue to impact economies, businesses and markets and will not go away quickly or easily.
In addition, we are facing a general election in the UK, with considerable uncertainty as to its outcome. This will create yet more nervousness and volatility in markets.
There will be continuing quantitative easing and low interest rates and also a lower oil price, which will hopefully help to calm the volatility somewhat.
So next year we are likely to see large swings in the FTSE 100 and some quite dramatic one-day movements as markets react to world events. But my guess is that we will end the year at marginally down on this year’s close at 6,200, since many equities still offer good value and decent yield support when compared with fixed income.
There are also still attractive growth and recovery opportunities to be found.
Angus Campbell, senior Analyst, FxPro: Stimulus from falling oil prices will feed through
5,750 FTSE prediction
The recent turmoil in financial markets is a firm indication that things in 2015 are unlikely to be easy or straightforward for investors.
As a case in point, the FTSE 100’s inability to push on higher and take out its all-time high at 6,930 (6,950 intra-day) ought to be seen as a warning. The FTSE 100 is a very good measure of not just domestic, but global investor sentiment and it has struggled to break to new all-time highs on two occasions since it was set in 1999.
As a global index this is something all investors should be wary of given its heavy weighting in energy and mining stocks. This has restricted the FTSE 100’s upside and in order to see the all-time highs taken out, sentiment towards these sectors needs to recover.
This will only happen if the global economic picture improves, which at this moment in time might seem like a long way off, but as the stimulus from falling oil prices feeds through, a good buying opportunity could be presented to investors in the first half of 2015.
However, this does not mean that the bull market is set to continue and 2015 has the potential to be a very tricky year for investors to navigate.
Sam Smith, CEO, Finncap: Rollercoaster year will be driven by uncertainties
6,800 FTSE prediction
2015 looks set to be a bit of a rollercoaster year for equities, driven by uncertainties over the oil price, Putin’s Russia, the end of QE, interest rate rises, and a UK general election.
In contrast to the larger, multinational listed companies, those in finnCap’s specialist area of focus, ambitious companies, have more exciting prospects. Their flexibility and ability to adapt more quickly present the opportunity for significant upside over the anaemic growth forecast for many. In particular, we expect companies operating in the technology sector and life sciences to continue to perform well in 2015.
Access to capital will also remain high on the agenda for growth companies. The second half of 2014 demonstrated that an investment opportunity with a strong investment case, experienced management and that is sensibly priced will remain attractive to fund managers for investment whatever the climate. However, there are many innovative new sources of funding such as Peer 2 Peer platforms which are set to increase their market share once again in the year ahead.
Whilst 2015 will be the Chinese Year of the Sheep, for those involved in the stock markets, it is those operating outside the flock who are likely to be the real winners.
Nicolas Ziegelasch: head of equity research, Killick & co: Rebound in eurozone and US growth will help earnings
7,200 FTSE prediction
This year has been a mixed year for equities, with the S&P 500 hitting record highs, while Japan has also had a strong year as the market-friendly policies of “Abenomics” improved investor sentiment towards equities.
European equity markets struggled though in the face of tougher than expected economic conditions, with the Euro Stoxx 50 index broadly flat.
In the UK, the FTSE 100 was a laggard, due largely to its higher exposure to the poor-performing oil and basic material sectors.
For 2015, we expect equities to show positive performance as the US continues its good growth and eurozone growth shows a modest rebound. In the UK, the GDP growth forecast for next year has recently been upgraded slightly by the Office for Budget Responsibility to 2.4 per cent.
We are expecting companies’ earnings to grow by around 5 per cent over the year, which is a lower level than expected from other major markets given the FTSE 100’s higher weighting towards Oil & Gas and Basic Resources sectors.
Our forecast for the FTSE 100 at the end of the year would leave the market on a forward price-earnings ratio (PE) of 13.2 times and a net prospective yield of 3.9 per cent.Reuse content