The FTSE 100’s winners and losers of 2023 – as Rolls-Royce rocketed 221%

After a strong 2022, it has proven to be a lacklustre year for the UK market.

While other global markets rallied in the face of higher interest rates and inflation, the FTSE 100 and FTSE 250 languished amid economic uncertainty.

The latter half of the year’s market movements were dominated by erratic repricing of interest rate expectations, as investors juggled competing data on the health of the UK economy and markets tried to second guess when a cut might come.

While the FTSE 100 has ended the year broadly where it started, there have been some stocks that have made significant gains, while others haven’t fared as well.

Rolls Royce and M&S led the FTSE 100 in 2023, while miners Anglo American and Fresnillo suffered 

How has the UK market fared this year?

The early days of 2023 saw the UK market off to a flying start, as optimism grew that central bank rate hikes might soon come to an end.

Bond markets had increasingly priced in the prospect of cuts before the end of the year.

The FTSE 100 continued its good performance from 2022 and broke the 8,000 mark in February, aided by its weighting towards large-cap energy and banking stocks.

However, sticky inflation started to weigh on stocks as the Bank of England continued to hike rates, causing chaos in the mortgage markets.

The FTSE 100 was also hit by the impact of the collapse of Silicon Valley Bank in March, with banking shares hit in a huge sell-off.

The FTSE 250, which has a greater concentration of domestically-focused stocks slipped back 5.4 per cent by the middle of the year, reflecting pessimism over the outlook for the UK economy.

Since then, the Bank of England pressed pause on rate hikes at their current level of 5.25 per cent, suggesting we have reached the peak of interest rates. 

While markets have priced in a base rate cut as early as May 2024, the central bank has been at pains to push back overly optimistic forecasts.

A series of better-than-expected inflation readings have helped both the FTSE 100 and FTSE 250 climb back to trade flat on the year. 

By comparison, the S&P 500 and Nasdaq gained 23 and 42 per cent respectively.

Michael Hewson, chief market analyst at CMC Markets said: ‘On a two-year timeline the FTSE 100 has performed a little more in line with its peers… Against the Dax and S&P 500 it’s been a performance of steady as she goes, compared to the peaks and troughs of the latter.

‘That is still small comfort, however when looked at on a longer timeline. The last 20 years have been a consistent story of serial underperformance for the FTSE100.’

Which stocks have performed well in 2023?

While last year saw key FTSE 100 sectors like energy and commodities perform well, the best performers of 2023 had less of a defensive bias.

This year Rolls Royce and Marks & Spencer have had their own turnaround stories, which have seen their share prices soar.

Rolls Royce achieved profitability and positive cash flow in 2023 after facing significant headwinds during the pandemic, which saw lower demand for aircraft engines.

New CEO Tufan Erginbiligic’s restructure to focus more on engines and defence helped to buoy shares 221 per cent between 31 December 2022 and 20 December 2023.

Laith Khalaf, AJ Bell’s head of investment analysis said: ‘It’s been a barnstorming year for Rolls Royce, with cost cutting measures and a resurgence in air travel driving better business performance and a big shift in investor sentiment.

‘Erginbilgic will be pretty pleased with himself after taking over the reins in January, and describing the company as a ‘burning platform’, but it looks more like a firecracker after performance this year.’

M&S has had a similar turnaround, with CEO Stuart Machin’s push for sales finally gaining traction.

A strong set of Christmas results got 2023 off to a good start with both clothing & home and food divisions performing well.

The high street giant’s shares had been on a downward trajectory since 2015 as investors mourned flagging sales, before bottoming out at the height of the pandemic in May 2020.

Its share price has swelled 120 per cent this year and returned to paying a dividend for the first time since the pandemic, albeit at just 1p per share.

Hewson said: ‘The less pessimistic outlook on the UK economy has seen strong performances from other retailers like Primark owner Associated British Foods, Next, B&M European Retail, as well as travel and leisure in the form of IAG, IHG and Premier Inn owner Whitbread,’ said Hewson.

It also proved to be a positive year for housebuilders Taylor Wimpey and Barratt, despite the chaos seen in the mortgage markets after rates rocketed.

Khalaf said: ‘The market was already anticipating tighter monetary policy and consequently shares in the housebuilders were trading at extremely low levels this time last year. 

‘The property market has actually so far proved more resilient than many people expected, and recent hopes for interest rate cuts in 2024 have put some sparkle in the performance of the housebuilding sector.’

Which stocks have fallen the most in 2023?

On the other end, mining companies suffered as commodity prices came under pressure due to demand fears.

Anglo American fell 38.3 per cent in the year to 20 December 2023, as the drop in prices of iron ore, copper and coal made a dent in its revenue and profitability outlooks.

Chris Beauchamp, IG’s chief market analyst said: ‘The mining sector is facing concerns about weakening global growth, high inflation and potential recessions. These factors are weighing on the demand and pricing for Anglo’s commodity exposures. 

‘As a result, the company may experience a decrease in demand for its commodities, which could further impact its profitability.’

Fresnillo also came under pressure this year, primarily driven by inflation and falling metal prices, with its share price down 34.7 per cent.

Beauchamp said: ‘​In addition to cost-related challenges, Fresnillo has also encountered difficulties in its production processes. 

‘The company had to revise its full-year production guidance for 2022 due to lower ore grades and delays in development projects. These issues raise concerns about the company’s ability to achieve growth targets.’

St James’s Place shares have been dealt a major blow by the Financial Conduct Authority’s introduction of Consumer Duty rules in July. 

Under the new regulation, all financial services firms have to provide ‘fair value’ and ‘timely and clear information’ to customers. 

Watchdogs have long had concerns that SJP charges excessive or unfair fees to customers for financial advice and early withdrawals.

Shares have plunged by around 30 per cent since the introduction of the rules, which forced SJP to scrap exit fees for new bond and pension investments.  

This post first appeared on Dailymail.co.uk