Top-tier and underperforming American and British equities in 2023
The FTSE 100, the UK's main stock market index, has had a strong start to the year, soaring to new record highs and climbing 6.6% year-to-date. However, not all stocks have fared equally well. Data from AJ Bell reveals that the bottom 10 FTSE 100 stocks have negative year-to-date returns.
Among these, Burberry has the worst year-to-date return (-38%), followed closely by JD Sports (-28%) and Reckitt (-21%). Barratt Developments (-16%) and Croda (-22%) also find themselves in the list of the ten worst-performing FTSE 100 stocks.
Across the Atlantic, the S&P 500, the US stock market index, has posted far stronger returns, climbing by 16.75% over the same period. Yet, some S&P 500 stocks have struggled. Paycom Software, for instance, has the tenth-worst year-to-date return (-31%), while Lululemon (-42%), Walgreens Alliance (-54%), and Cooper Companies (-77%) are among the worst performers.
Interest rate cuts could potentially boost sectors like housebuilding, as suggested by some commentators. This could lead to a shift in some of the sectors that are currently underperforming. Housebuilders like Barratt Developments could see a boost once interest rates are cut.
The US stock market, including Big Tech firms like Nvidia, has also been climbing to record highs. Yet, some Big Tech stocks like Intel (-38%) and Warner Bros Discovery (-35%) have struggled this year.
Year-to-date returns can help identify trends, such as the ongoing march of Big Tech and the effect of persistently high interest rates. The London Stock Exchange has lost a string of companies to buyout activity in recent years, including AI and cybersecurity firm Darktrace, the top performer in the FTSE 100 year-to-date.
In the UK, both Labour and the Conservatives have committed to building more homes over the course of the next parliament. This, along with potential interest rate cuts, could provide a boost to the housebuilding sector.
Meanwhile, one criticism of the UK stock market is that it is under-exposed to technology companies. British microcomputer-maker Raspberry Pi went public with an initial public offering last month, which could signal a shift in this regard.
Investment analyst Dan Coatsworth at AJ Bell stated that it's no wonder that investors have put their faith in North America to build their wealth. However, several companies across the US and the UK have delivered glittering returns, outperforming the broader indices by some margin.
Entain has the second-worst year-to-date return (-37%) among the bottom 10 FTSE 100 stocks, while EPAM Systems has the fifth-worst year-to-date return (-37%) among the bottom 10 S&P 500 stocks. MarketAxess has the ninth-worst year-to-date return (-32%) among the bottom 10 S&P 500 stocks, and Globe Life has the eighth-worst year-to-date return (-33%) among the bottom 10 S&P 500 stocks.
Interest rate cuts tend to lift equity markets in general. However, the specific list of the ten worst-performing stocks in the FTSE 100 and S&P 500 for 2024 is not provided in the data.
In conclusion, while the broader market indices have shown strong performance, there are several stocks that have struggled this year. Investors should keep a close eye on these stocks and consider their potential for recovery.
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