January 29, 2023

Navigating the FTSE 100 in 2023: Opportunities and Challenges for Investors

The FTSE 100 is a gauge that measures the performance of the 100 largest publicly traded firms listed on the London Stock Exchange. The index is a benchmark for the overall performance of the UK stock market.

The FTSE 100 can fluctuate for various reasons, including economic conditions, company performance, and global market trends. It is not uncommon for the stock market to experience a boost in the weeks following Christmas and the new year, known as a “Santa Rally.”

However, in 2022, the Santa rally did not pan out for FTSE assets. As a result, investors are worried. However, investors should not take this statement with doom and gloom as it is not exactly bad news for the new year; Here is why

2022 to Forget

Last year was not kind to investors, with the FTSE 100 dropping by almost 2% in December, while the instability in the market saw the S&P 500 index crush by 6% in December. However, the FTSE 100 has a track record of not failing in December and has done so just eight times, including in December last year.

This fact makes investors worry about 2023, given the tragic end to 2022. However, Russ Mould believes if history is anything to go by, a bad end to 2022 does not necessarily indicate gloom in 2023. The last year’s major geopolitical and pandemic problems caused many different sectors to suffer, including the crypto and energy sectors.

Investors need to remember that a bearish trend may signal a bullish trend as time continues. Ross believes several factors continue to plague the market, including conflict, inflation, economic downturn, and rising interest rates.

Despite these challenges, the FTSE 100’s low currency value and low earnings multiple, combined with a generous dividend yield, may attract investors and defy expectations in the coming year. While the US market may appear less affordable compared to its history and does not offer the same dividend yield, it is worth noting that buybacks often make up a significant portion of cash returns to investors in the US.

What Can You DO

Despite the challenges faced by the FTSE 100 in 2022, the energy sector and mining and finance companies remain strong investment opportunities. According to data from AJ Bell, the oil and gas sector is likely to have a 24% growth in pre-tax profits and a 23% growth in dividends, while the experts predict the financial sector to have a 23% growth in pre-tax profits and an 18% growth in dividends.

AJ Bell also expects the mining sector to see strong growth, with a 16% projection for pre-tax profits and dividends. But, as always, investors must research and carefully consider their investment strategies before making any decisions.

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