FTSE ups and downs of 2016
Mining regined supreme while Housebuilding plummeted
by Abi Moses on 4th January, 2017 and updated 5th January, 2017 10:11am
Referred to as 'the year that defied expectations', 2016 was certainly a adventure with regards to the FTSE 100, with many firms on the stock exchange changing shape as the year panned out. Seeing many blame the theme of uncertainty that surrounded Brexit for such dramatic shifts in share prices.
While unable to predict the future of the FTSE 100 (although we will give it a good go), we can look back at the winners and losers of 2016, making our own conclusions to devise spread bets from.
The winners of the year
Enjoying an attractive return of over 200%, the mining companies emerge as the superstars of 2016. While starting off on shaky grounds, and overproducing metals, the sector saw an increase in debt that many predicted to be the start of a more slipperier slope. However, following the first quarter of the year, the mining industry heading in more of a positive direction, arguably down to increasing demand from Asia as well as its historically low rates.
While ending on a high, and no longer sat in the FTSE bargain bucket, where can we expect the sector to head now? Discussing the possibilities, our partners, IG write:
'The sector is no longer in the market’s ‘bargain basement’ section, but even now valuations are not too demanding. Crucially, president-elect Trump’s stimulus programme could offer the chance for more gains, as US demand for metals rises. Plus, dividends are making a return, so we could see further investor inflows to help compensate for those that may be selling out now the fire sale in major names like BHP Billiton, Rio Tinto and Anglo American appears to be over.'
Oil and gas similarly had a great year, starting off on a rocky road before triumphing in the second quarter. This change happened when OPEC began to do something to curb record output levels.
At the other end of the spectrum we have housebuilding. Pairing rising house prices with solid demand, the building sector faced its difficulties in 2016, seeing the index down 4%. Seeing signs of cost inflation and overstretched valuations, the year started off badly and simply got worse.
Fast forward to June 23rd and the news of Brexit only dramatized that, and the share prices of some big housebuilders lost upwards of 30%.
Real estate investment trusts (REITs) also saw themselves in the red, falling over 12% over the course of the year.
'The sector was loved for its yield and the clear strengths of the UK, and the City of London in particular, as a business and finance hub that would keep demand for office space strong. Brexit shook that view, especially as some property funds began halting redemptions. Suddenly investors began to worry and demand for office space would flag and that dividends would fall' IG continues.
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