A TURBULENT YEAR FOR STOCK MARKETS TO DATE

A TURBULENT SEVEN MONTHS FOR STOCK MARKETS –
MORE UNCERTAINTY TO FOLLOW!

INDEX 31/12/13 8/08/14 % change
FTSE 100 6751 6567 -2.7%
DAX 9552 9009 -5.7%
DOW 16576 16554 -0.1%
S&P 500 1848 1931 +4.5%

The S&P 500 rose 29.6% in 2013, its best annual performance since 1997, while the Dow climbed 26.5% in its best year since 1995. The NASDAQ jumped 38.3 %, its best year since 2009. The FTSE 100 rallied by just 14.5% in the same period and the DAX by 25.5%. Since 9th March 2009 – QE day – the S&P 500 has risen by 180% and the FTSE by 92%!

Set out below is a chart of the performance of some of the main constituent companies.

Company 31/12/13 price 8/08/14 price % change
Tesco 325p 247p -24%
Next 5368p 6725 +25%
M&S 433p 417p -3,6%
AB Foods 2474p 2681p +8.3%
Sainsbury 352p 299p -15%
Morrison 251p 169p -32.6%
Royal Mail 560p 420p -25%
BATS 3160p 3402p +7.6%
Imp Tobacco 2260p 2484p +9.9%
BP 472p 467p -1.1%
Royal D Shell 2103p 2380p +13.1%
Anglo-American 1266p 1528p +20.6%
Rio Tinto 3343 3368p +0.7%
BHP Biliton 1834 1999p +8.9%
RBS 340p 347p +2.1%
Lloyds Banking 78.4p 72.1p -8%
Barclays 266p 215p -19,1%
HSBC 644p 634p -1.5%
Aviva 441p 498p +12.9%
Prudential 1316p 1328p +0.9%
GSK 1550p 1372p -11.4%
Shire PLC 2843p 4554p +60.2%
Astra Zeneca 3500 4153p +18.6%
United Utilities 653p 840p +28.6%
Severn Trent 1663p 1871p +12.5%
Centrica 335p 307p -8.3%
BG Group 1286p 1171p -8.9%

COMMENT –

The world and his wife knows that quantitative easing – colloquially known as ‘funny money’ – has underpinned the recovery of global stock markets since March 2009, post the collapse of the global banking system. The progress made by most indices has been not only phenomenal but conceivably unrealistic. However this improved sentiment probably saved the world’s economy from a fate worse than death.

This year, to date, has been turbulent to say the least. Investors have known for some time that valuations were going to be called in to question. Would the global economy crack-on? Some did not legislate for China’s economy coming off the boil with GDP falling from 9% to nearer 7.5%. The threat of tapering QE in the US coupled with higher interest rates rattled the cage of emerging markets, though rate increases have yet to materialise. Few thought that Ukraine would become a seriously disturbing geopolitical threat. The idea of Iran coming back on the bridle was interesting though the implosion of terrorism courtesy of the ISS in Iraq is not only unwelcome but should never have happened, had been any contingency plans for the rebuilding of Iraq, post the 2003 invasion. Then of course the revulsion of the carnage in Gaza has fuelled further uncertainty to the already teetering political stability.

Looking at the net movement of global markets, an unrealistic picture has been painted. Though there have been long periods of inertia with volumes at derisory levels, markets have had their moments of volatility. The year started in an upbeat frame of mind, which allowed private equity to get stuck in to IPOS in lightening up its portfolios. There have been 104 IPOS in Europe. 38 remain below the Plimsoll line.

On the plus side for the UK GDP at around 3.1% is higher than anywhere in the Western world – pro-tem, as the US had a desperate first quarter – -2.9% thanks to inclement weather conditions. However the FTSE 100 is not a wholly accurate barometer of economic activity in the UK. Many stocks are international or global. The star sectors have been drugs thanks to M&A, though GSK has disappointed with corporate governance issues as well as pipeline concerns; Some utilities – United Utilities and Severn Trent have excelled though BG has had profits warnings and Centrica political pressures on pricing as well as the damage from its stake in BG. The banks have been in the doldrums and the insurance sector has been somewhat somnolent, though Aviva has girded up its loins on the road to recovery.

The best ‘Arfur Daleys’ apart from those mentioned, have been NEXT and AB Foods (Primark). The disappointment has been supermarkets and M&S. There has been no food inflation, a price war, some surrender of market share to Aldi and Lidl and a lack of foresight in reacting to the fact that the consumer has less disposable income and therefore is more discerning in choosing what to purchase.

Putin has withdrawn some tanks from near the Ukraine. US markets enjoyed this fact on Friday night. Will markets react? There are some investors that continue to remain bullish and will use corrections in the market to pick up stock. I wish them well!

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom
http://www.panmure.com – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of miss-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

David Buik
Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom
http://www.panmure.com

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