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UK shares have had a rocky run with the FTSE 100 falling 4.4% in the last six months. It continues to increase by 8.81% in one year, but what is the reason for the recent reversal?
As always, there are a number of factors at play. China is big. The world's largest economy continues to struggle despite a series of stimulus packages from Beijing. I have seen a direct impact on several FTSE shares on my self-invested personal pension (SIPP).
During the boom years, China consumed 60% of the world's metals and minerals production. That source of demand has declined, hurting the mining giant's revenue. Glencore. Chinese shoppers are also consuming less, dealing a blow to luxury fashion houses. Burberry. These two stocks have plummeted 18.37% and 48.05% respectively in 12 months.
The FTSE 100 has fallen but it will return
The run-up to the first Labor Budget in 14 years also weighed on the FTSE, as businesses and consumers worried about tax rises. On Friday we saw the impact on the UK economy. After rising 0.7% in the first quarter and 0.5% in the second, GDP growth fell to just 0.1% in the third quarter. In September, the economy actually contracted 0.1%.
The pain could drag on as businesses face £25bn increases in national insurance from April. Another SIPP holding company, JD Sports Fashionhe slipped as a result. It employs more than 50,000 people in the UK and higher labor costs will squeeze margins. Its shares are now down 16.59% in 12 months.
The outcome of the US presidential election boosted US markets but had a mixed reception in the UK, Europe and beyond, as investors worry about Donald Trump's proposed tariffs.
pharmaceutical giant GSKanother SIPP holding company, was affected by Trump's decision to nominate anti-vaccine activist Robert F Kennedy Jr to head the US Department of Health and Human Services. Its shares are down 12.92% in one month and 6.59% in the year.
However, I am not going to sell any of these stocks. I think they are good companies that have been affected by forces beyond their control. In time I think they will return.
The same applies to the consumer goods giant. Unilever (LSE: ULVR). Its shares were in recovery mode but have now fallen 6.68% over the past month. Fortunately, they are still up 16.69% in 12 months.
Unilever's price recovery has stumbled
On October 24, Unilever reported a 4.5% increase in third-quarter underlying sales, led by electrical brands. Pigeon, Comfort and Magnum. This exceeded analysts' expectations of 4.2% growth.
It still expects full-year sales growth to be between 3% and 5% as CEO Hein Schumacher gets the business back on track. “do fewer things, better and with greater impact”. Although he still has a way to go.
The obvious concern is that Unilever will be hit by US tariffs. North America contributed 19% of its total turnover last year and is one of its three priority markets, along with India and China.
Part of the impact is priced into Unilever's share price after the recent drop. I will take the opportunity to reload my bet as soon as I can. Then I'll go looking for more FTSE 100 deals, because there are plenty of them these days.
