Could The FTSE 100 Be About To Collapse?

Royston Wild considers where the FTSE 100 (INDEXFTSE: UKX) could be headed next.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

After enjoying a handsome relief rally towards the end of January, another hefty downleg in stock indices has dominated the headlines once again in recent sessions.

Just today the dash from ‘riskier’ assets into safe-havens like gold has seen the FTSE 100 (INDEXFTSE: UKX) sink to around the 5,600-point marker, a level not seen since November 2012 .

A plunge through this psychologically-critical level is likely to see fresh buckets of blood on the trading floor, a scenario that — in my opinion at least — would appear to be an inevitability, as fears concerning harsh cooling across the global economy click through the gears.

Should you invest £1,000 in British American Tobacco right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British American Tobacco made the list?

See the 6 stocks

Drillers, diggers and banks still diving

Somewhat inevitably, the FTSE 100’s latest shunt lower has been driven by further weakness across natural resources stocks.

Dedicated copper miner Antofagasta has led the way down with a 9% slump from Monday’s close. And commodity clangers Anglo American, Glencore, BHP Billiton and Rio Tinto make up the remainder of the top five losers in Tuesday’s session.

The continuation of the severe, multi-year downturn across the metals and energy stocks comes as no surprise as recent manufacturing data from China indicates an increasingly-bumpy economic landing.

And investors are being given little reason to expect a turnaround in commodity values as major producers across the oil and mining industries steadfastly refuse to curtail rampant production levels.

But raw materials producers have not been the sole culprit in dragging the FTSE lower — indeed, the index’s heavy weighting towards the banking sector has also been cause for much of the recent weakness.

Predictions of escalating PPI-related penalties at the likes of Lloyds and RBS has added to creaking investor appetite, while concerns over slowing emerging markets has driven HSBC and Santander firmly lower.

Profit warnings pounding higher

Market sentiment hasn’t been helped by a spate of worrying financial updates in recent weeks. FTSE 100 plays AstraZeneca, Pearson and Royal Dutch Shell have all released profit warnings since the start of the year, and Rolls-Royce is expected to be the latest member of the club later this week.

Consultancy EY advised late last month that British-listed companies issued 313 profit warnings in 2015, up from 299 in the prior 12 months. And the number of warnings released between October and December clocked in at 100, the highest quarterly total since the start of 2009. And the signs are ominous looking ahead as macroeconomic troubles persist.

Alan Hudson, EY’s head of restructuring for UK & Ireland, said “Many of the challenges that dominated last year — oil, China, and the emerging markets — have continued into 2016.” And Hudson added that new factors, such as the upcoming ‘Brexit’ referendum, have thrown more mud into the water.

Fortune favours the brave

But while fresh turbulence for the FTSE 100 is just about guaranteed in my opinion, I believe that now is a great time for investors to pick up some great blue-chip stocks that are currently going for a song.

The likes of Diageo, Vodafone and BAE Systems, for example, are all top-quality operators with great growth prospects, but which have been washed out as part of the wider bear market enveloping global indices. These three stocks in particular are currently dealing at multi-month lows. Indeed, Vodafone is changing hands at levels not seen since the end of 2014.

As ever, investors should always look past near-term share price bumpiness and consider the long-term returns on offer. And there are still plenty of stunning stocks to be found at terrific prices across each of the major FTSE indices.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca, Diageo, HSBC Holdings, Rio Tinto, and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

3 high-yield dividend shares to consider buying for a retirement portfolio

Dividend shares can provide retirees with regular passive income in their golden years. Our writer picks out three with yields…

Read more »

Investing Articles

Tesla stock has halved. Could it now double – or halve again?

After a wild few months for Tesla stock, Christopher Ruane weighs some pros and cons of the investment case. Could…

Read more »

Investing Articles

Does it make sense to start buying shares as the stock market wobbles?

Does a rocky stock market make for a good or bad time to start buying shares? This writer reckons it…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£15k of passive income a year? It’s possible with the right dividend strategy!

To figure out how much dividends are needed for a lucrative passive income stream, investors must understand which strategies get…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As US markets wobble, I’m listening to Warren Buffett!

The long career of billionaire investor Warren Buffett has included plenty of market turbulence. Here's what our writer's learnt from…

Read more »

UK money in a Jar on a background
Investing Articles

5 shares yielding over 5% to consider for a SIPP

Christopher Ruane introduces a handful of FTSE 100 and FTSE 250 shares he thinks an income-focussed SIPP investor should consider.

Read more »

Investing Articles

Here’s how an investor could invest a £20k ISA to target £1,500 of passive income per year

Can a £20,000 ISA throw off close to £30 per week on average of passive income when invested in blue-chip…

Read more »

Investing Articles

As gold hits $3,000, this FTSE 100 stock is primed for blast off

As Western institutions scramble to get as much gold as they can lay their hands on, Andrew Mackie believes this…

Read more »