It is very early in 2022 but there is an old saying that ‘As goes January, so goes the year.’ So far, the FTSE 350 is up by less than 2% and only 15 of its 40 individual industry subsectors are showing any gains. However, the identity of those 15 sectors is telling and suggest that the UK stock market may not be a bad place to be if inflation stays entrenched and confounds any efforts by central banks to rein it in
This is because the leading gainers operate in industries where demand is fairly price inelastic, such as energy and tobacco; where higher interest rates and steeper yield curves may help profit margins and earnings, at least up to a point, such as banks and insurers; or that own real assets where supply is expensive to build and where that supply is growing more slowly relative to money supply, such as miners.
|Top 15 FTSE 350 sectors in 2022*||Worst 15 FTSE 350 sectors in 2022*|
|Banks||14.5%||Real Estate Investment Trusts||(3.9%)|
|Oil, Gas and Coal||14.0%||Closed-end Investments||(5.6%)|
|Industrial Metals & Mining||8.2%||Beverages||(7.0%)|
|Finance & Credit Services||6.4%||Software & Computer Services||(7.5%)|
|Food Producers||5.0%||Support Services||(7.6%)|
|Telecoms Services||4.9%||Real Estate Investment & Services||(7.9%)|
|Autos & Parts||4.6%||Precious Metals & Mining||(8.2%)|
|Consumer Services||4.1%||Industrial Engineering||(9.1%)|
|Aerospace & Defence||3.3%||Personal Goods||(9.8%)|
|Life Insurance||3.1%||Electronics & Electrical Equipment||(10.2%)|
|Travel & Leisure||2.5%||Household Goods & Home Construction||(10.4%)|
|Healthcare Providers||1.0%||Leisure Goods||(14.2%)|
|Gas, Water & Multi-utilities||0.8%||Telecom Equipment||(15.2%)|
Source: Sharepad. *To the close on Friday 14 January
“The FTSE 100 is home to many of these heavyweight sectors and even if the headline index is up just 2% in 2022, it stands some 10% higher than a year. Moreover, the good news is that earnings momentum remains positive for the FTSE 100 as analysts continue to increase their profit estimates for 2022 and 2023,” says AJ Bell Investment Director Russ Mould.
“The less good news is that aggregate profits growth for the index is expected to slow to a virtual crawl following 2021’s rebound. Not all of the numbers are in yet, but total pre-tax profits for the FTSE 100 are expected to have doubled in 2021. While it is unrealistic to expect such a torrid pace to continue, advisers and clients could be forgiven for looking askance at estimates which look for 6% profits growth in 2022 and just 1% in 2023.