In 2022, most of the world’s major share indices had their worst year since 2008, but the UK’s FTSE 100 was a star performer.
| Index | 2022 Change |
| FTSE 100 | +0.9% |
| FTSE 250 | -19.7% |
| Dow Jones Industrial | -9.2% |
| Standard & Poor’s 500 | -19.8% |
| Nikkei 225 | -9.4% |
| Euro Stoxx 50 (€) | -11.7% |
| Shanghai Composite | -15.1% |
| MSCI Emerging Markets (£) | -12.6% |
Yes, the table is correct. In the year of three Prime Ministers, four Chancellors, a catastrophic ‘mini-Budget’ and double-digit inflation, the UK stock market was one of the world’s best major market performers, eking out a small gain where most others recorded a loss. The MSCI All Country World Index – a good benchmark for Global plc – fell by 9.7% in sterling terms.
Inevitably, such a surprise result from the UK comes with some important qualifications:
- The yardstick that shows the UK posting a positive return is the FTSE 100, which only covers the largest 100 UK listed companies. Look at the broadest UK index, the FTSE All-Share, and there was a loss of 3.2%.
- While the FTSE 100 is an index of companies listed on the London Stock Exchange, it is far from a snapshot of UK plc. About 14% of the index is accounted for by three energy companies – Shell alone accounts for over 9%. The basic resources sector provides just over 9%, albeit its constituents do not have their mines in the UK.
- The 250 mid-sized companies that form the FTSE 250 and sit below the FTSE 100 are closer to what most people would consider UK plc. As the table shows, this group had a tough 2022 – just what might be expected given the state of the UK economy.
- While the FTSE 100 outperformed the US and Eurozone, the gap is not so wide when currency performance is considered. Sterling fell 11.2% against the US dollar and 5.4% against the euro.
- On the plus side, if you had re-invested all the FTSE 100 dividends over the year, your return would have been 4.7%, a reminder that the UK stock market remains a good source of income.
The UK’s winning streak in 2022 – at least in FTSE 100 terms – does not mean you should now ignore investment diversification. After all, the FTSE 100 was way behind the best performing global market of the year. That title, with a jump of over 100% in sterling terms, belonged to a country with over 80% inflation – Turkey.
To discuss your financial planning, contact our Sheffield based Financial Advisers on 0114 266 4432 or info@smh.group
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