2022 has so far been a bumpy ride for global share markets. But the FTSE 100 is up 3% since trading began in January.
The Footsie’s risen despite the impact of soaring inflation and the Russia-Ukraine war on investor confidence. A survey from trading platform eToro suggests that the lead index could be poised for solid gains over the short-to-medium term.
In fact, investors think the Footsie will keep outperforming other major overseas indices during the next 12 months.
A bright outlook
According to eToro, 26% of retail investors expect the FTSE 100 to record gains of at least 6% over the next 12 months.
By comparison, 21% of investors reckon the S&P 500 in the US will punch gains above 6% in the coming year. This figure falls to 17% for Japan’s Nikkei and China’s Shanghai indices and 15% for Europe’s Euronext.
Looking again at the FTSE 100, 26% of retail investors think the Footsie will trade within a narrow +5% or -5% range over the coming year. And 16% believe it will fall by 6%, or more.
US stocks fall behind
Explaining these differing investor expectations for global equities, Ben Laidler, Global Markets Strategist at eToro, notes that the events of recent months “have upended markets” and that “a combination of rocketing inflation, rising interest rates and major geopolitical instability has caused investors to take risk off the table.”
This has been particularly damaging for US stock bourses like the S&P 500 and NASDAQ, indices which have performed strongly in the past few years.
In particular, Laidler points out that high-growth sectors like technology — a significant portion of US stock markets — have slumped in 2022 as traders and investors have ducked for cover. The NASDAQ and S&P 500 are down 12% and 7% respectively since the beginning of the 2022.
Why the FTSE 100?
Laidler notes that the FTSE 100 “has come to the fore” for several reasons. Firstly, the huge weighting of oil firms has lifted the index as energy prices have soared. Shell and BP collectively account for almost 10% of the FTSE 100’s entire weighting.
It’s worth pointing out too that diversified commodities producers with high weightings like Glencore, Rio Tinto and BHP Group have risen strongly too, thanks to soaring metal prices.
Secondly, eToro notes that the FTSE 100 “is packed full of the types of cheap and defensive firms that investors tend to turn to when in times of uncertainty.” It has therefore risen as investors have sought out stodgy safe-haven shares.
So what next?
Past performance is not a reliable indicator of what to expect going ahead. But it seems that the three issues of “soaring inflation, rising interest rates and the war in Ukraine” that eToro points out will continue to dictate investor thinking for some time.
I plan to continue finding FTSE 100 shares to buy in 2022. But I won’t just be looking for stocks that could rise strongly in the near term. I’ll be digging deeper to find companies that could deliver excellent returns long into the future.