Join our community of smart investors

Markets face stiff headwinds

There are still plenty of reasons to think shares could struggle in the months ahead.
Markets face stiff headwinds
  • Stock markets face uncertainty with positive surprises hard to come by
  • Companies this week: AB Foods, Rentokil, Taylor Wimpey, Bunzl, Ashtead and Moneysupermarket.com

It feels as if stock markets are hitting quite a bit of resistance right now.

This should not really come as a surprise. Markets and economies have had the kitchen sink thrown at them and even people starting to talk about negative interest rates again is not giving share prices a kick.

It always comes down to profits and the outlook for future profits in the end. While many companies have posted some decent earnings reports in recent weeks, the headwinds seem to be picking up at the moment.

For UK-listed overseas earners, the increase in the value of the pound is beginning to bite and reduce translated revenues and profits. Rising commodity prices are also hitting costs. Some companies such as Travis Perkins expect to be able to pass them on, whereas AB Foods is expecting to experience lower profits.

The other big elephant that remains in the room is Covid-19. While the UK and US are making very good progress vaccinating their populations, Europe is some way behind. The surge in cases in India is very alarming and could not only dampen economic growth, but also hit global supply chains, which could cause inflation.

Download PDF