Equity markets have been under pressure so far this year. Spiralling inflation and slumping investor confidence have taken their toll.
Over in the US, the S&P 500 index suffered its worst first half since 1970, falling 20.6%. And the tech-heavy Nasdaq — down 29.2% — had its worst first half since the dotcom crash.
The UK’s FTSE 100 has been more resilient, with a first-half loss of 2.9%. However, there’s been considerable volatility along the way. Notably, the half ended with a fall of 5.7% in June — the biggest monthly drop since the Covid sell-off of March 2020.
Let’s have a look at the Footsie’s top risers and fallers over the first-half period.
Big winners
The five biggest risers all made gains of 26% or more.
BAE Systems (+55%) was the standout performer. It was followed by Standard Chartered (+38%), Shell (+33%), British American Tobacco (+31%) and AstraZeneca (+26%).
Russian aggression
Russia’s invasion of Ukraine stunned the world. NATO countries are now seriously rethinking their defence budgets.
UK defence giant BAE Systems is likely to see a considerable increase in demand for its products. Its 55% first-half rise reflects the market’s response to the seismic shift in the defence landscape.
The invasion also impacted the price of oil. It broke through $100 per barrel after Russian boots marched on to Ukrainian soil. Shell’s 33% gain caught the eye, but fellow Footsie producer BP also outperformed the index, with a rise of 19%.
Banks
Economic growth for the next few years is forecast to be much stronger in regions like Asia, Africa and the Middle East than in the UK and other advanced economies.
Standard Chartered, with its first-half gain of 38%, happens to do the vast majority of its business in Asia, Africa and the Middle East, although HSBC, which has a large focus on Asia, also performed well (+22%). This contrasted with negative returns from UK-focused Lloyds and Natwest, and UK/US-focused Barclays.
Defensives
Tobacco and pharmaceuticals are classic defensive sectors. This means their earnings tend to be relatively resilient to inflation.
British American Tobacco and AstraZeneca are the biggest stocks in these sectors. Their first-half gains of 31% and 26%, respectively, round out the Footsie’s top five winners, although their blue-chip sector peers — Imperial Brands (just outside the top five) and GSK — also made positive returns of 25% and 13%, respectively.
Big fallers
The FTSE 100’s five biggest fallers in the first half all suffered losses of 40% or more.
And there were marked sector themes among the 10 worst performers. The 10 consisted of three retailers, three financial services firms, three industrials, and a housebuilder.
Retailers
Ocado (-51%), JD Sports Fashion (-46%) and B&M European Value Retail (-41%) occupied three of the top five spots on the fallers table.
Market concerns about inflation and the cost-of-living crisis have hit the retail sector. Loss-making Ocado — long valued more like a tech stock than a grocer — was the Footsie’s biggest faller of all.
Financial services
Those firms in the financial services sector whose fortunes are closely geared to growth in the value of their assets under management also performed poorly.
Negative movements in equities, bonds, and a number of other asset classes hit sentiment for companies like retail investment platform Hargreaves Lansdown (-42%), alternative asset manager Intermediate Capital Group (-37%) and investment trust Scottish Mortgage (-37%).
Industrials
Most firms in the industrials sector are sensitive to the economic cycle. We’ve been seeing downgrades to economic growth forecasts, particularly in Western economies, and rising recession fears.
The industrials sector is a conspicuous one facing headwinds from big increases in raw materials and energy prices, and wage inflation and global supply chain turmoil. Industrial equipment rental firm Ashtead (-40%), and engineers Halma (-37%) and Spirax-Sarco (-37%) are big casualties in the FTSE 100.
UK housebuilders are facing some of these headwinds, as well as particular pessimism about the outlook for the domestic economy. Barratt Developments (-37%) was one of the Footsie’s top 10 first-half fallers, but fellow volume builders Taylor Wimpey (-30%) and Persimmon (-26%) were also big losers.
Opportunities
The overall performance of the FTSE 100 is one thing, but there are always stocks whose gains or losses depart significantly from it.
As always, with a Motley Fool business-focused and long-term investing philosophy, our analysts are concentrating on high-quality enterprises. The shares of some of these have risen but are still undervalued, while others have been dragged down by indiscriminate sector sell-offs.
