China and Russia have thrashed the FTSE 100 this year. Can Britain fight back?

Harvey Jones says the second half of the year could be much tougher for the FTSE 100 (INDEXFTSE: UKX) but this could mean some bargains to be had.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Great Britain was never going to be the world’s favourite investment in 2019, as Brexit uncertainty casts a lengthy shadow over our economic prospects.

A good start

The FTSE 100 has done remarkably well to rise 10% in the first six months of the year, so it could have been worse. These two stocks have climbed by 50%.

The blue-chip index is a special case as its constituent companies generate more than three quarters of their earnings overseas, but the domestic-focused FTSE 250 has grown by a similarly positive percentage. So yay, Great Britain!

I suggest you enjoy it while it lasts.

BRICs are back!

The UK has been completely trounced by China and Russia, though, with the Russian Trading System up 29.9% year-to-date, while China’s CSI 300 is up 27.4%, according to new research from investment platform AJ Bell.

Investment director Russ Mould said the Bank of Russia’s move to cut interest rates gave it a lift, while Russian companies are under state pressure to be more generous to shareholders. Energy firm Gazprom hiked its dividend twice in a week, sending its share price soaring.

Fund choices

China’s success is a bigger surprise, given the ongoing trade spat with the US, although the Government has responded by pumping yet more stimulus into the economy. If trade troubles intensify, then debt-strapped China could still be vulnerable.

Tempted? You could track these countries through a low-cost exchange traded fund (ETF) such as iShares MSCI Russia or iShares MSCI China, or an investment trust such as JP Morgan Russian Securities or JP Morgan Chinese. Personally, I hold unit trust Neptune Russia & Greater Russia, which has done very well for me.

Elsewhere…

The US has also continued its burst of strong performance with the NASDAQ up 20.1% year-to-date and the S&P 500 up 16.7%, both well ahead of the UK. France and Germany have done well, rising around 16% each. With growth of 14.6%, Brazil confirms there is still life in the BRICs.

So the UK is a relative laggard, I’m afraid. Will that change? To a large degree, that all depends on the B-word as political strife and fears of a no-deal EU departure increasingly drag on the economy, slowing investment and growth.

Deal with it

Tory leader front-runner Boris Johnson has pledged to take the UK out on 31 October “deal or no-deal” but there is no Parliamentary majority for crashing out, so investors might have to brace themselves for another general election before we fix this.

I can’t see that doing much for market sentiment.

Perhaps Boris can work his magic on the EU and secure some kind of deal acceptable to the Brexiteers who are backing him. It doesn’t look that likely at the moment. On top of all that, we also have to factor in the wider worry of a slowing global economy.

The FTSE 100 has done surprisingly well this year but now may just be its highpoint.

So start building your stock of ammunition as there could be plenty of buying opportunities in the politically and economically volatile months ahead if share prices fall. There are some tempting FTSE 100 dividend stocks out there right now.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »