British blue chips are on the rise, but recession could torpedo prospects
Britain’s stock market has its critics, who have derided it over the years as a fuddy-duddy collection of “19th-century companies”, and even called it a Jurassic Park index for its lack of cutting-edge members.
But every dinosaur has its day and, rather like the Jurassic Park franchise, the FTSE 100 blue chip share index has enjoyed something of a resurgence in 2022.
While most stock markets have taken a mauling, the FTSE has managed to rise by about 1% – not a mammoth increase, but more than enough to outshine its rivals. America’s S&P 500 is down 14% since the start of January, as rising interest rates punctured tech stock euphoria. Germany’s Dax has shed almost 19%, as fears of energy shortages sent German consumer sentiment to record lows.
The FTSE 100 has in fact been kept afloat by some of the old-economy companies disdained by growth investors. Oil giants BP and Shell have defied the wider market volatility: their shares are up almost 40% as they profited from soaring gas and oil prices caused by the Ukraine war.
Weapons manufacturer BAE Systems is the best FTSE 100 performer this year, up almost 50% as Russia’s invasion heralds increased orders for military kit from governments.
“Banks like HSBC and Standard Chartered have also outperformed, helping to support the FTSE 100, with rising interest rates improving net interest margins,” says Victoria Scholar, head of investment at Interactive Investor. Tobacco companies such as Imperial Brands and British American Tobacco have also fared well, rallying nearly 14% and 25% respectively.
Exporters have been helped by the weak pound, which has shed 12% of its value this year as Britain’s economy outlook deteriorated. The outlook for sterling is also poor, with October’s 80%
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