While global stocks have climbed to multiple record highs in 2017 on a wave of bullish exuberance, the FTSE 100 has lagged far behind its surging peers.
The UK’s benchmark index climbed just 7,
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2016’s outperformers, the FTSE 100’s big exporters, have come under pressure from the value of their earnings sinking on a stronger pound.
Greater uncertainty surrounding Britain’s economic outlook has also made it the “ugly duckling of the major markets”, Mike Bell,
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He explains: “In the US,
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Despite slipping consumer confidence and households tightening their belts amid rising prices,
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Mr Bell says that the economy's confounding of the apocalyptic post-Brexit predictions of some experts has helped mid-cap stocks claw back ground lost in the immediate aftermath of the Brexit vote.
High street feels the heat from squeezed consumers
Sterling’s rebound hasn’t been strong enough to curb rising inflation ramping up the pressure on Britain’s high street,
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Costly imports from the pound’s depreciation have pushed CPI up to 3.1pc and wage growth remains stubbornly subdued despite a tightening labour market. Squeezed UK household incomes have passed on the pressure to the UK’s retailers, which are already feeling the heat from the march of online competition.
While inflation-proof bargain stores such as Primark and B&M have bucked the trend, shoppers under the cosh from negative real wage growth have stayed away from the high street. Gloomy Boxing Day footfall figures hint at more woe for bricks-and-mortar retailers but the Bank of England expects inflation to begin to ease during 2018.
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While shares in Next, Dixons Carphone and Debenhams have tumbled on profit warnings, online rivals, such as Aim-quoted Asos and Boohoo, are continuing to enjoy double and even triple-digit revenue growth.
Retail expert Nick Bubb argues that the performance has been “very polarised” and that high street names have been “a pretty disparate bunch”.
Plastic gaming figurine retailer Games Workshop, the best-performing stock on London’s main market in 2017, offers a glimmer of hope for the high street, however. The Nottingham-based retailer has embraced the shift online by launching apps and bumped up its international exposure, sending its shares soaring 275pc in 2017.
London’s other struggling sector this year, outsourcing and support services, features a cast of names more than familiar with profit warnings and share price plunges in recent years.
Squeezed shoppers have stayed away from the high street in 2017
The sector has endured another year to forget. Paper-thin margins exposed by mispriced contracts have driven share prices into the ground with HS2 and Ministry of Defence contractor Carillion seeing its valuation plunge by an eye-watering 93pc in 2017.
The troubled firm has plenty of company from its peers in the City doghouse. Mitie, Interserve and Capita have all also plunged on the back of profit warnings and the turnaround at security outsourcer G4S, once the sector’s light at the end of the tunnel, has stuttered in the second half of the year.
Commodities and airliners rebound
Three major European airlines going bust in 2017 points to another miserable year for the sector but its survivors have soared this year.
The EU referendum, currency movements, union problems and terrorism concocted the “perfect storm” for airliners in 2016, says Aviva Investors head of UK equities Trevor Green.
Easing headwinds and robust load factors - a measure of how full a firm’s planes are - have aided the recovery. Mr Green adds that the demise of Monarch is “very significant” to no-frills peer easyJet with surviving airliners poised to benefit from reduced competition in the fierce battle for market share in Europe.
easyJet benefited from rivals' woes
EasyJet and British Airways owner IAG have rebounded 43pc and 47pc, respectively, while Central and Eastern European carrier Wizz Air has seen its valuation double to ?3.7bn in 2017. Meanwhile, Michael O’Leary-led Ryanair has seen its momentum fizzle out as pilot union disputes finally come to a head.
Commodity stocks have also experienced a Lazarus-esque resurrection following a grim 2016. The FTSE 100’s mega miners and oil majors have bounced back on recovering prices. After sinking in 2016, copper prices have rallied to a four-year high as demand climbs in Asian powerhouse China, the dollar - which metals are priced in - sinks on currency markets and the electric car revolution promises increased demand.
Brexit success will drive up stock markets
With Brexit uncertainty only slightly dampened by December’s breakthrough deal and the Bank of England having made just one tiny step on the road to tighter monetary policy, the pound’s continued volatility could remain the FTSE 100’s key driver in 2018.
The central bank has warned investors that more rate rises will at a “gradual pace” and to “a limited extent”. While the Federal Reserve remains on course for three rate hikes this year on the back of buoyant GDP growth in the US, the markets are pricing in just a 68pc chance of one hike in the UK before the end of the year.
Swift progress in Brexit talks would help consumer confidence
Credit: PA
Swift progress in Brexit talks would boost consumer confidence and give the green light to delayed investment decisions currently stifling growth in the UK.
“With business confidence at a six-year low and no expectation of productivity growth picking up any time soon, investor sentiment, along with the value of the pound, will likely remain subdued,” warns IG market analyst Chris Beauchamp.
The bull run on global markets is continuing
Although a little long in the tooth at nine-years old, the bull run on equity markets is showing no signs of letting up in 2018.
The fundamentals suggest that stocks and their dizzyingly high valuations are not in bubble territory but are being lifted higher by “rational exuberance”, according to Mr Beauchamp.
He adds that the bull run is likely to continue to be supported by strong earnings, a stable economic backdrop and monetary policy remaining relatively accommodative despite the Fed stepping up its tightening cycle.
Stocks in Europe, which have struggled to keep pace with their soaring peers across the Atlantic, could strengthen if the euro begins to weaken amid slightly cooling growth in the eurozone and hesitancy at the ECB over tapering plans as sluggish inflation continues to linger in policymakers’ minds.
But Mr Bell warns that “we are now nine years in a economic cycle that in the post-war period has never lasted more than 10”, adding that small and mid-cap stocks are at the most risk when markets are on the decline.
“There is going to come a point, maybe not next year but not in the too distant future where markets may be in more of a risk-off mode and those small and mid cap stocks will be harder hit in that environment,” he says.
WEEDS ON THE COMPOST HEAP
At this time of year I have masses of greenery to compost, and I would like to chop up the lot, weeds and all, and compost everything. However, my heaps never get to temperatures that will kill seeds. Is there an easy way around this? Loris Goring – via email
The weed seed problem is a real one, but since you refer to “heaps”, perhaps it is worth mentioning straight away that properly balanced ingredients (as much brownery as greenery) enclosed in a bin and covered to retain heat, rot down a lot faster than a heap (open or covered).
Plastic bins work, but I find wood is better and sides should be solid (if pallets are used they can be stuffed with old compost bags or lined with them). Adding grass clippings (which heat up almost instantly) and turning your heap regularly helps to lessen the likelihood of weed seeds surviving, but you are right to be extra cautious.
Fresh grass cuttings on a compost heap
Credit: Ian Wood/Alamy
Annual seeders (e.g. chickweed, spurge, scarlet pimpernel, fat hen) can be easily dunked in buckets of water till they decompose, or bagged in black bags and left to heat up/steam to death in the sun. Then the whiffy contents of both can be tipped in the bin.
Remember not to leave uprooted flowering weeds that have volatile seeds (e.g. groundsel, nipplewort and willowherb – aren’t these names wonderful), lying around since they have a nasty habit of going to seed when your back is turned. Scraps of perennial weeds (bindweed, ground elder) should be treated differently: leave them to desiccate in the sun before joining the big rot-down with everything else.
Perhaps I should mention here, too, that certain garden plants should be considered weeds because of their invasive seeding habit. Dunk, for example, pulled-up forget-me-nots and verbascum before binning or you may live to regret it.
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SULKY, SPRAWLING LAVATERAS
Juliet Ball-Wilson despairs of her lavatera ‘Barnsley’. She planted it as an easy, floriferous “filler” for a big, shrubby border that she doesn’t want to think about too much. It did a good job, but almost overwhelmed a much-loved Rosa glauca (although it looked beautiful with the rose’s thundercloud-coloured leaves, she says).
Despite being “tidied up” (in an attempt to free up the rose) the lavatera went downhill the following year. Branches split and lolled around, foliage looked unhealthy. Juliet wonders if it can be saved as removing it will leave an enormous hole in the border. Judging by the photographic evidence Juliet sent, I would say that it is time this short-lived blowsy drama queen was replaced. Given that it grows about 4ft in all directions in a season, a young replacement slotted into place next spring will amply fill the space taken by its predecessor, and will look a lot more handsome.
This time, instead of a “tidy-up”, Juliet should cut it right back in March 2019 (much as you would a late-summer flowering buddleia). Also, she should re-firm its roots (lavatera’s rapid growth renders it notoriously rocky) and feed it. It may even last three years – but probably no longer.
Helen Porteous has been growing lavatera ‘Barnsley Baby’ (a showy dwarf version) in a pair of containers – and these, too, are looking sulky after their second year. She should turf them out, I think. They may get an extra “life” if planted in the ground elsewhere, fed, and spring-pruned. She can start afresh with the containers next spring. Sulking plants in containers should not be tolerated.
RED CURRANT APHID
What is causing the leaves on my red currant bush to become puckered and discoloured, and how can I prevent it happening in future years? The bush is over two years old and has not yet fruited, but seemed healthy until the leaves get screwed up in summer. Trisha Parker – via email
Extreme puckering and blistering of shoot tips is the work of an aphid that specifically attacks currant bushes (Cryptomyzus ribis). As aphids suck sap from opening buds in spring, they also inject a substance that causes developing leaves to blister. You should apply a winter wash (Growing Success Winter Tree Wash) to try to eliminate any insects overwintering on branches. Also spray the young foliage in spring with Westland Resolva Bug Killer or organic sprays such as pyrethrum (Defenders Bug Killer, Bug Clear Gun for Fruit & Veg, or ecofective Bug Killer, which also contains fatty acids). But the fact your currant bushes have not fruited is probably down to their relative youth as this pest does not greatly affect fruit production.
