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

FTSE 100 stocks form the core part of my portfolio. But it’s not positive in 2022. The index, now hovering around 7,500, has been propelled up by surging supply stocks while dozens of FTSE 100-listed companies tanked.

Stocks are down

The index fell and recovered in 2022. But the uneven and imprecise recovery started from a high point. We have seen oil and resource stocks rise and these companies are disproportionately represented in the FTSE 100.

But stocks in many other sectors suffered. Banks, retailers, supermarkets, home builders are among those challenged by the evolving economic environment.

Forecast

Forecasts vary and can change daily. The Economic Forecast Agency (EFA) has suggested monthly range forecasts which look quite promising.

The organization suggested that the FTSE 100 could push up to 8,686 in March. This would be an increase of 14% from the current level. That would be good.

The lower end of the estimate suggests the FTSE 100 could close at 7,702 in March. That’s still above where we are now. I like to take that.

But this is only one forecast, and March is EFA’s peak forecast for the year.

A better environment?

Most of the challenges we saw in 2022 will continue into 2023. But inflation will slow down, and interest rates will eventually come down.

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

Moreover, the emerging recessionary environment does not look like it will improve in the coming months.

However, as investors, we tend to look at least six months ahead. In the spring of 2023, we hope to see the light at the end of the tunnel.

I bought it?

Yes, I bought falling British stocks. I am quite confident about some of the UK listed stocks, especially in the banking sector. Several sectors have been trading at a discount in the UK since the Brexit vote, and banking is among them.

I appreciate this discount also reflects 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 reasonable economy and I hope there will be some positive developments regarding trade in the coming year. The promised ‘Global Britain’ looks increasingly lonely.

I also see core financial services companies being challenged in 2022. Direct Line Insurance has been caught by rising inflationary claims, but the company is now writing back to its target margin.

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