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These Footsie giants soared in Q4. Time to sell up?

After a rocky first nine months of the year, British retail institution Marks & Spencer (LSE: MSK) finished the year as one of the FTSE 100’s strongest performers in Q4. The stock advanced 6% between October and December.

Investors have felt compelled to pile back into it thanks to a steady stream of bubbly high street data, confounding predictions of a sharp decline in shopper appetite following June’s Brexit vote.

Indeed, the latest CBI retail survey showed sales volumes last month leaping at their fastest pace since September 2015. But the body’s chief economist Ben Jones has warned that conditions look set to get much tougher — Jones cautioned that “the pressures on retail activity are likely to increase during 2017, as the impact of sterling’s depreciation feeds through.”

With inflation expected to rise sharply this year, woeful demand for Marks & Spencer’s fashion lines looks set to worsen even further. The company saw like-for-like sales of its clothing and homeware items slide 5.9% during April-September as the public continued to shun its offer.

With appetite for Marks & Spencer’s food divisions also slipping in recent months, I believe there’s little to prompt stock pickers to keep piling in. And while a prospective P/E ratio of 12.1 times is attractive on paper, I reckon the retailer’s share price is in danger of collapsing again should fresh restructuring fail and deteriorating market conditions keep sending sales lower.

Sell Shell?

It comes as little surprise that Royal Dutch Shell (LSE: RDSB) has rocketed during the fourth quarter, the stock reaching 13-month peaks just last week on the back of the successful OPEC production accord. Shell gained 18% in total during October-December.

The Doha deal has been heralded as a game-changer in addressing the supply/demand imbalance washing over the oil market. And with no little reason. After all, OPEC is responsible for around 40% of global crude output.

But those believing in an immediate eradication of the supply overhang may end up disappointed as output rises elsewhere. The latest Baker Hughes rig survey showed another 13 rigs added in the US during the week to December 23, taking the total to 523. This is the eighth weekly rise in a row, and the count is likely to keep rising thanks to Brent’s move back above $50 per barrel.

And this isn’t the only barrier to additional oil price strength, and with it a solid earnings rebound at the likes of Shell, as a surging US dollar could see already-patchy crude demand come under further strain.

With many also casting doubts on the robustness of OPEC’s November production cut, I believe investor appetite for Shell could moderate again. Indeed, a forward P/E rating of 15.7 times fails to reflect the fossil fuel leviathan’s huge risk profile, in my opinion, particularly as industry data remains less-than-reassuring. I reckon recent share price strength leaves Shell in peril of a heavy correction.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.