The FTSE winners and losers from a volatile start to 2016
Having started the year standing at 6,242, the index of the UK’s largest 100 companies sank to a low of 5,536 in February, before recovering to finish at 6,175 at the end of March.
Indeed despite a slew of ugly results, Laith Khalaf, a senior analyst at Hargreaves Lansdown, says it has been the mining companies which claimed the top spots performance wise over the respective time period. Top of the pile were Anglo American and Glencore, which clocked respective total returns of 84.4% and 73.9% in the first quarter.
Khalaf says: “Anglo American and Glencore have been two of the most volatile stocks in the index of late, lurching from the top of the FTSE to the bottom in a matter of hours. Gold mining companies have also performed well as economic fears and negative interest rates have driven the price of gold up from $1,061 to $1,230 an ounce so far this year.”
Outside of the mining sector Khalaf notes there are other turnaround stories in the top 10 performers, with Morrison, Tesco, Pearson and Rolls Royce all in the list. “All these companies have had a torrid time of late and may just be showing signs of turning the corner,” he says.
At the other end of the scale, with the exception of Lloyds, all four of the FTSE 100 banks found their way into the bottom 10 performers so far this year, with Barclays and RBS sitting bottom of the pile.
“Barclays and RBS have done particularly badly as investors have punished them for delaying dividends, and still being some way off rude health seven years after the financial crisis,” says Khalaf.
“The banks have also been marked down as a result of the continued low interest rate environment,” he adds. “While they are at different stages of recovery, they are all at least heading in the right direction. However the risk is that while they are in the process of getting to their feet, an economic slump knocks them back down again.”
For Khalaf, the lurch down in the FTSE at the start of this year, and the subsequent recovery, highlight the importance of not getting carried away by sentiment. He says the rebound has been the result of some recovery in commodity prices, and a retreat from the extreme pessimism which took over markets at the start of the year.
However rather than be concerned by what is happening in 2016, Khalaf says investors really need to step back and look further out. “The UK stockmarket is neither cheap nor expensive by historical standards, which means investors putting money in the market today are getting a relatively fair price,” he says.