FTSE 100 Q1 recap: a volatile quarter

Edward Sheldon looks at the performance of the FTSE 100 (INDEXFTSE: UKX) index between January and March 2018.

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.

The first quarter of 2018 is over and I’m sure it will be one that many investors would prefer to forget about. Here’s a brief recap of how the FTSE 100 performed over the last three months.

Volatility returns

After a decent 2017, in which the UK’s blue-chip index generated a total return of 11.9% with low levels of volatility, 2018 started on a positive note. Upward momentum from December carried over to the new year, with the index rising from just below 7,700 points at the start of January, to an all-time high of just under 7,800 points around the middle of the month.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

However, that’s where the fun stopped. The FTSE 100 slipped back towards the end of January as the pound rose against the dollar (offsetting earnings of companies with US operations), before plummeting sharply to below 7,100 points in early February, as concerns over rising interest rates in the US triggered a sell-off across global markets. There was a slight recovery in late February, before further declines in March. The index closed the quarter at 7,056 points – an 8.2% fall for the quarter.

Let’s take a look at how individual sectors performed.

Banks

Q1 was a mixed quarter for the UK banks. Shares in Lloyds Banking Group traded as high as 72p in January before falling back to 65p by the end of the quarter, despite the bank reporting a solid set of results and increasing its dividend by 20%. Barclays also had some good news on the dividend front, stating that it plans to increase its dividend this year too. Barclays shares were relatively flat for the quarter. HSBC had a poor quarter, falling around 17% between mid-January and late March.

Oil

Shares in both Royal Dutch Shell and BP rose in early January, as the oil price climbed higher. However, oil fell sharply during the February sell-off, with Brent declining from around $71/bbl to $62/bbl and shares in the oil majors retreated. It’s worth noting that the price of Brent has since recovered to $68/bbl, yet the share prices of Shell and BP remain depressed.

Utilities

Utility stocks such as National Grid, SSE and Centrica remained out of favour in Q1. The sector is struggling at present due to concerns over renationalisation, interference from regulator Ofgem and a rising interest rate environment. We did see a little pick-up in sentiment towards the end of the quarter though.

Consumer staples

Even the usually-popular consumer staples stocks struggled during Q1. Shares in both Unilever and Diageo lost their positive momentum, while the tobacco companies were sold off heavily. British American Tobacco and Imperial Brands had terrible quarters, both falling significantly as investors rotated out of the group of stocks known as bond-proxies.

What to expect in Q2

If there’s one thing we can take away from the last quarter it’s that after an easy ride in 2017, the markets have returned to a more ‘normal’ state. Volatility is back. And with ongoing uncertainty over trade wars, plummeting US tech stocks and interest rate rises, it may not disappear soon.

However, volatility shouldn’t be feared. Sure, the investment environment has become more challenging in the short term, but there are now plenty of attractive investment opportunities appearing.

Stay calm, average into the market, and think long term, and you should be rewarded in the years to come.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Edward Sheldon owns shares in Lloyds Banking Group, Royal Dutch Shell, Unilever, Diageo and Imperial Brands. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Barclays, BP, Diageo, HSBC Holdings, Imperial Brands, Lloyds Banking Group, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Young female analyst working at her desk in the office
Investing Articles

Should I buy Amazon shares?

Amazon has a strong web services business and our author thinks its online retail operations are underappreciated. So should he…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

How I’d invest a Stocks & Shares ISA today for dividend income in the future

Our writer has been investing his Stocks and Shares ISA with the aim of building income streams for the long…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

2 undervalued passive income stocks I’d buy today with £1,000

Falling stock prices are pushing up dividend yields. As a result, our author is looking for undervalued passive income stocks…

Read more »

Close-up of British bank notes
Investing Articles

2 cheap dividend shares I’d buy in a heartbeat

Our writer picks a pair of FTSE 100 dividend shares he would consider for his portfolio, that he thinks look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

With £500, I’d use the Warren Buffett method to find cheap shares

The legendary investor Warren Buffett has become a billionaire by following some key investment principles. Our writer explains why he…

Read more »

Man in a clothing store in a medical mask because of a coronovirus.
Investing Articles

Down 81%, are boohoo shares set for an explosive comeback?

boohoo shares have been falling rapidly. But could interest from a billion-dollar hedge fund cause a turnaround in 2022?

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

The Tullow Oil (TLW) share price jumps after losses! Is now the time to buy?

The Tullow Oil (TLW) share price ticked upwards on Thursday morning after falling nearly 30% over the last month. So,…

Read more »

Female analyst sat at desk looking at pie charts on paper
Investing Articles

Is the Lloyds share price about to dip below 40p?

The Lloyds share price has been trading below 50p for the better part of the year. But could the stock…

Read more »