INVESTING SHOW: Will the rest of 2022 be better for investors and can the UK stock market continue to outperform?
Investors are past the halfway mark for 2022 and it has been a troubling year so far, with the global markets dominating US in bear market territory.
But even as the S&P 500 in the US has fallen 20 per cent since the start of the year, the UK stock market has for much of that period managed to keep its head above water and even after recent falls the FTSE 100 is down 4 per cent since the start of 2022.
The chief issue rattling investors is high inflation and rapidly rising interest rates, with central banks dramatically changing their tune and signalling that rather than supporting markets they are happy to raise rates into a recession.
But with both the Bank of England and the Fed hiking, why is the UK doing better than the US and will the second half of the year be better than the first? Richard Hunter and Simon Lambert discuss these issues and more on this episode of the Investing Show.
On this show, they take a look at why the shift to rising interest rates is troubling investors and making them shun growth stocks – and the sectors where inflation is boosting share prices.
Although the headline FTSE 100 index in the UK has not suffered as much as many other global markets, including the US, many investors will be feeling pain in their portfolios, as the below that the mid cap FTSE 250 is down 21 per cent year to date and individual popular stocks have taken even more substantial hits.
Among the biggest fallers over the past six months in the FTSE 100 are some major household names with Royal Mail down 48 per cent, Ocado down 46 per cent and ITV down 45 per cent.
If inflation starts to ease and central banks take their foot off the gas later in the year, could that see a rally for the stocks that have been beaten down by inflation crisis?
This is a question many investors are debating as they try to decide whether it is time to buy into shares on sale in the bear market or keep their powder dry fearing more bad news ahead.
One concern for investors is that much of the aggregate decline in stock market valuations has come from a downgrading on the price side of the price-to-earnings ratio, reflecting investors willing to pay less for stocks.
With fears that a recession is on the way, the earnings side could be riding for a fall too – leading to further market declines. With that in mind, Richard takes a look ahead at the US earnings season and what it could bring.