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Dozens of FTSE 100 shares tanked in 2022. What’s next?

Edinburgh Cityscape with fireworks over The Castle and Balmoral Clock Tower
Image source: Getty Images

FTSE 100 stocks form the core part of my portfolio. But that’s not been a positive in 2022. The index, currently hovering around 7,500, has been propelled upwards by surging resource stocks while dozens of FTSE 100-listed firms tanked.

Stocks slump

The index has fallen and recovered in 2022. But it’s been an uneven recovery and it wasn’t exactly starting from a high point. We’ve seen oil and resource stocks surge and these company’s are disproportionately represented on the FTSE 100.

But stocks in a host of other sectors have suffered. Banks, retailers, supermarkets, housebuilders are among those challenged by the evolving economic environment.

Forecasts

Forecasts are varied and can change on a daily basis. The Economic Forecast Agency (EFA) suggests a monthly range forecast that looks fairly promising.

The organisation suggests that the FTSE 100 could push as high as 8,686 in March. This would represent a 14% increase from current levels. That would be great.

The lower end of its estimates suggest the FTSE 100 could close at 7,702 in March. That’s still above where we are now. I’d happily take that.

But that’s just one forecast, and March is the EFA’s peak forecast for the year.

A better environment?

Most of the challenges we’ve seen in 2022 are likely to continue into 2023. But inflation is likely to slow as the year goes on, and interest rates will eventually come down.

When it comes to interest rates, forecasts really vary. Some see them rising above 5% in mid-2023, while most see them falling towards 2% in 2025. Either way, the cost of borrowing will remain higher for the foreseeable future.

Likewise, the evolving recessionary environment doesn’t look like it’s going to improve much in the coming months.

But, as investors, we tend to look at least six months in advance. By spring 2023, we hopefully will be able to see the light at the end of the tunnel.

Am I buying?

Yes, I’m buying fallen UK stocks. I’m pretty bullish on several UK-listed stocks, particularly those in the banking sector. Several sectors have been trading at discounts in the UK since the Brexit vote, and banking is among them.

I appreciate that these discounts also reflect long-term concerns about the health of the UK economy after Brexit, namely trade barriers and inactive working-age citizens.

But the UK is still a considerable economy and I’m hoping there will be some positive developments with regards to trade in the coming years. The promised ‘Global Britain’ appears increasingly isolated.

I’m also looking at core financial services firms that were challenged in 2022. Direct Line Insurance had been caught out by rising inflations claims, but the firm is now writing at target margins once again.

Is it too soon to buy housebuilder stocks again? I’m not sure, but I’m keeping a close eye on the sector.

The post Dozens of FTSE 100 shares tanked in 2022. What’s next? appeared first on The Motley Fool UK.

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James Fox has shares in Direct Line Insurance Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2023