2022 has been painful for investors, but London stock markets have avoided carnage. This will come as a shock to many given the current gloom and there is also second good news.
This year’s problems are not limited to the UK. All major economies are finding the situation difficult and their stock markets have crashed as a result.
Yet there was one notable and surprising exception. The UK has performed better than any other global stock market this year.
No, I’m not making this up.
The figures are available for the first three months of the year, through September 30, 2022, and they show the UK stock market is a safe haven in these troubled times.
While the big stock market gainers of the past decade have plunged into a bear market, the FTSE 100 is quietly more than holding its own.
In a sea of red, it somehow stayed afloat, according to new figures from investment platform Bestinvest.
Overall, international stock markets have fallen 24.42% this year, according to the MSCI World Index.
Emerging markets are down 27.1%, according to MSCI. Countries like Brazil, Mexico, India and Indonesia offer higher potential returns, but also carry higher risks.
What few expected the all-conquering US stock market to take such a beating, with the S&P 500 Index down 22.71%.
Tech giants like Apple, Amazon, Facebook (now Meta Platforms), Microsoft and Tesla have enriched investors over the past twelve years.
Last year, they depleted them, dropping an incredible 35.96%, as measured by New York’s tech-focused NYSE FANG+ index.
Europe also had a stench. The MSCI Europe ex-UK index fell 32.25%.
These are painful numbers for investors as it will reduce the value of our pensions and ISA stocks and shares, but there is a silver lining.
Amid the devastation, the MSCI UK index fell just 1.39%. It would only take one day of positive trading to put it back in the black.
READ MORE: FTSE 100 rebounds, but Truss warns crisis is ‘far from over’
The second best performing index was Japan’s Topix index, which fell 3.84%.
Jason Hollands, chief executive of investment fund platform Bestinvest, said the big blue chip companies listed on the FTSE 100 index have proven to be “resilient”. “This is the best-performing major stock index so far this year, as the old economy strikes back.”
The FTSE 100 is full of old-school stocks such as oil and gas explorers, mining companies, banks, insurers, healthcare and pharmaceutical companies.
It also has many “consumer staples” businesses, which offer basic necessities that people continue to buy during a recession, such as household cleaning, hygiene and groceries.
These companies tend to be less risky and also pay attractive dividends, which can help dampen inflation.
The FTSE 100 has another advantage: the companies in the index generate three-quarters of their profits abroad.
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So they actually benefited from the fall of the pound, as their income is worth more when converted back into pounds.
As if that weren’t enough, the pound’s 17.27% fall against the dollar this year has persuaded US investors to invest in UK companies because their money is traveling much farther here.
This led to a buying spree.
A falling pound is generally bad news, as it pushes up import costs and forces the Bank of England to raise interest rates, which will make mortgages more expensive.
But this year it delivered at least one surprising piece of good news, helping to keep British businesses competitive.
There is nothing to be complacent about. Britain’s small and medium-sized businesses, which are plugged into our national economy, also suffered, falling just over 30% as investors shunned smaller, riskier companies.
It’s the same pattern everywhere.
In what Hollands calls an “ugly” year for everyone, the FTSE 100 won this year’s admittedly flawed global beauty pageant.