Page 44 - Phonebox Magazine March 2016

It has been di cult to ignore the nancial markets over the last year. At the beginning of 2015, the FTSE 100 stood at 6,547 but by the middle of March it had broken through the 7,000 barrier for the rst time and set an all-time high on 27th April of 7,104. Since then we have seen a decline in markets, with a 4 year low being reached on 11th February of 5,537.
However, the FTSE 100 is only one way of measuring how shares are performing and it is not always the most reliable way of re ecting the movement of share prices overall. This is because it is a weighted index, meaning the larger stocks e ect the movement of it more than the smaller ones.
There are always a number of factors e ecting the movements of the markets but the two key ones over the last few months have been the slowdown in the Chinese economy and the dramatic fall in the price of oil and other commodities. Whilst you may assume that falling oil prices would be good for most companies – resulting in lower transport costs and bene ting companies manufacturing oil based products such as plastics – for oil and mining companies it is a di erent story.
The largest company by value in the FTSE 100 is Shell, with BP in 6th place, and the fall in their share prices has had a considerable e ect on the FTSE 100. This is clearly demonstrated by the returns in the calendar year 2015, which showed the FTSE 100 falling 1.3% (including reinvestment of dividends) compared to the average UK All Companies fund which saw a rise of 4.9% after charges. Over 3 years, the equivalent gures were a FTSE 100 rise of 18% against the average fund rise of 34.5%.
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This article does not constitute advice and should not be taken as a recommendation to undertake any course of action mentioned without consulting a relevant professional.
Figures correct as of 12th February 2016
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44 Phonebox Magazine | March 2016
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