I think these FTSE 100 stocks could sink like a stone next year. Here’s why.
Barclays
Banks with significant US exposure have a good chance to grow profits, and especially if President-elect Donald Trump’s planned reforms jump-start the economy. Wide-scale deregulation could also benefit operators on the other side of the Atlantic.
But this isn’t enough to tempt me to buy Barclays (LSE:BARC) shares. The bank still sources the lion’s share of its profits — around 60% — from the UK. This creates large risks to investors, in my opinion, given the prospect of continued weak loan growth and higher-than-normal credit impairments.
Retail banks like this may also struggle if interest rates continue falling. This would put further downward pressure on Barclays’ net interest margins (NIMs), which are already under strain as competition from challenger banks and building societies heats up.
Finally, I’m nervous about potentially thumping penalties related to the mis-selling of car finance. It’s probably not as exposed as Footsie rival Lloyds, but it could still face fines of hundreds of millions of pounds, perhaps more.
This month, ratings agency Fitch said Barclays, Lloyds, and Santander could all face downgrades if found liable for penalties. It follows a Court of Appeal ruling that deemed ‘secret’ commissions paid to car retailers as unlawful.
Since then, consumer finance expert Martin Lewis has said a Financial Conduct Authority (FCA) probe into the saga could be much wider than previously thought.
He wrote on X (formerly Twitter) that the investigation would look at “ALL car finance commission complaints, not just the Discretionary Commission Arrangements (DCAs) complaints previously covered“.
Barclays’ share price has rocketed 66% so far in 2024. I think this raises the danger of a correction, given the risks discussed above, and I’ll be staying clear.
Shell
I think buying commodities stocks is also risky as China’s economy struggles and Trump talks about fresh, growth-sapping trade tariffs.
Purchasing oil stocks like Shell (LSE:SHEL) could be a high-risk strategy in this climate. This Footsie oil major is down 2% for the year to date as the industry outlook has recently worsened. I think it could be in for a rough ride in 2025.
Fresh International Energy Agency (IEA) forecasts have amplified the sense of gloom. On Thursday (14 November), it predicted that oil supply would exceed demand by 1m barrels a day in 2025. And that’s assuming that OPEC+ countries maintain production cuts.
The IEA warned that weak economic conditions, the growth of green energy, a stronger US dollar, and surging production from the Americas all suggest substantial market oversupply next year.
Shell’s share price is performing far stronger than industry peer BP, whose share price is down 20% so far in 2024. Earnings beat forecasts in the third quarter, and the firm’s strong financial discipline saw it launch another share buyback, this time to the tune of $3.5bn.
Despite my downbeat assessment, trading might well remain rock-solid during 2025. Fresh trouble in the Middle East, for instance, or strong global growth could reignite oil prices.
But, on balance, I will be avoiding Shell in the new year, as I think it could be a risky buy.
