FTSE 100 half-year report

The FTSE 100 has made barely pedestrian progress so far this year. Here are the sectors and stocks that have held it back. There’ve been some big winners, though – and they may surprise you.

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The FTSE 100 hasn’t fared badly in the first half of 2023.
 
But neither has it fared particularly well.
 
It ended Friday at 7,532, compared with 7,452 at the start of the year. Up all of 80 points and a gain of little more than 1%.
 
Nevertheless, there have been some big risers and fallers among the stocks in the index. And some notable sector themes.

Laggard

The Footsie’s performance has lagged well behind its global peers.

In the US, the S&P 500 is up 16% year to date. France’s CAC 40 has gained 14% and Germany’s DAX 40 16%, both making record highs in the process. Japan’s TOPIX index – up 21% – has also recently been hitting new all-time highs.

What’s held the FTSE 100 back?

The UK’s flagship index contains little in the way of technology stocks. As such, it hasn’t benefitted from this year’s big global rally in the sector. It’s notable that the Footsie’s only tech representative, software firm Sage, has seen a strong rise of 24%.
 
At the same time, with global commodity prices softening, the FTSE 100’s heavy representation of energy, mining and chemicals stocks has been a hindrance to its progress.
 
Oil giants Shell (+1%) and BP (-3%) have contributed little. Miners – which include the Footsie’s two worst performers of all, Fresnillo (-32%) and Anglo American (-31%) – have been a significant drag. And chemicals firms Johnson Matthey (-18%) and Croda (-15%) have done our index no favours either.

On the home front

Domestically, the UK is suffering from stubborn and uniquely high inflation compared with other developed economies.
 
The Bank of England has struggled to tame it, despite 18 months of interest rate rises. The latest was an unexpectedly aggressive 0.5 percentage points hike from 4.5% to 5%.
 
“The UK Cost of Living Crisis” has become ‘a thing’ – it even has its own Wikipedia page.

Let’s party

Remarkably, given the backdrop for UK consumers, consumer-facing stocks have been among the Footsie’s biggest risers so far this year.
 
Food, clothing and homewares retailers are up. But many consumer companies reliant on more discretionary spending have done just as well – some even better.

Rampant retail

Supermarket giant Tesco has made a solid gain of 11%. And it’s not been all about shoppers tightening their belts. Products in its Finest range have been flying off the shelves, with sales up 15% in the latest trading update. Meanwhile, the share price of slightly more upmarket Sainsbury has risen an impressive 24%.

Associated British Foods, which owns Primark as well as food businesses, has enjoyed a rise of 26%, and mid-market fashion and homewares chain Next is up 19%.

The top Footsie retail riser, with a gain of 42%, is variety store chain B&M European Value Retail. It has, though, been surpassed by former FTSE 100 stock Marks & Spencer. After climbing 56%, M&S – a current FTSE 250 member – is now knocking on the door for re-admittance to the top index.
 

High demand in hospitality and leisure

None of the UK’s pub groups are big enough for the FTSE 100. But on the back of buoyant consumer spending, the shares of mid-caps JD Wetherspoon and Mitchells & Butlers are up 51% and 48%, respectively. Wetherspoons has said sales this year are likely to be a record.

Elsewhere in the hospitality sector, FTSE 100 multi-brand hotel owner InterContinental has risen 15%. And Whitbread, the owner of Premier Inn, has gained 32%.

Shares of Carnival – owner and operator of those floating hotels, restaurants and entertainment complexes otherwise know as cruise ships – have surged 124%. This is another current mid-cap stock climbing back towards the FTSE 100.

Soaring airlines

The performance of airlines has also been strong. British Airways owner and Footsie member International Consolidated Airlines has gained 31%. Mid-cap Wizz Air is 44% higher, and easyJet – up 49% – is yet another former FTSE 100 consumer stock now within touching distance of re-entry to the top index.

The best blue-chip performer of all in the first half of the year was Rolls-Royce. Its large civil aviation business, defence and energy-security interests, and an impressive new CEO, have been a potent mix for positive investor sentiment. The shares are up 62%.

I’m not sure the consumer cyclical sector offers quite as compelling value today as it did at the start of the year (after its battering in 2022). However, focusing on finding strong businesses trading at reasonable prices is never a bad idea.

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.

Graham has no position in any of the shares mentioned in this article. The Motley Fool UK has recommended Associated British Foods Plc, B&M European Value, Croda International Plc, Fresnillo Plc, InterContinental Hotels Group Plc, J Sainsbury Plc, Sage Group Plc, and Tesco Plc. 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.

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