Join our community of smart investors

The FTSE 350 Review

Welcome to our 2020 outlook for every stock market sector in the FTSE 350 Index
The FTSE 350 Review

This time last year, a good number of investors were bracing for a recession. 2018’s political uncertainty had weighed on UK companies and the FTSE 350 had finished the year down some 13 per cent. 2019 did turn out to be a mixed bag: a US-China trade war, a slowdown in Europe, and in the UK companies twice weathered the prospect of a no-deal Brexit as well as a general election in December. But we saw some remarkably resilient performances from a few companies: Games Workshop (GAW), JD Sports (JD) and Future (FUTR) were among a handful whose share price climbed by a three-digit percentage year on year. But our sectoral review of the index reveals some wider challenges for UK equities that are likely to continue into 2020. 

It seems as though the world sat up and paid attention in 2019, as teenage activist Greta Thunberg led a wave of renewed environmentalism. While the climate heats up, sustainability pressures weigh on industries across the index. Car sales are falling, people are ridden with flight guilt and fast fashion is getting kicked out. Retailers too are particularly exposed to the rise in e-commerce, as advances in technology upend traditional business models. It is hardly surprising that technology in itself outperformed all sectors over the past decade, with a compound annual growth rate (CAGR) of 18.2 per cent, according to Refinitiv. 

The 2010s let the tech giants run wild and regulation has struggled to keep up. The UK and US are now set on a collision course over digital tax, over claims that it discriminates against American companies such as Google and Amazon. Political uncertainty, both domestic and international, continues to create an uncertain environment for our FTSE 350. Earlier this month Boris Johnson conceded that there is still a chance that he will not secure a trade deal with the European Union before his self-imposed Brexit deadline in December 2020. 

Despite these challenges, there certainly remains a case for UK companies. We progress into 2020 with a majority Conservative government. The withdrawal bill that will see the UK leave the European Union on 31 January has gained royal assent. A great deal of pent-up activity may now be unlocked, given the number of companies that have taken a ‘wait and see’ approach. The potential political clarity of 2020 could produce a bounce-back for UK equities and the domestically-focused small- to mid-caps in the FTSE 350 stand to be the beneficiaries of such a recovery. 

Our US cousins certainly did very well in 2019, gaining a number of record highs on both the S&P 500 and the Dow Jones Industrial Average, primarily on swings in the trade war. Indeed US equities in the S&P 500 led global markets with a 13.6 per cent annualised return over the past decade, according to Refinitiv. But for some time now the US market has been dominated by monopoly-type stocks such as Facebook, Alphabet and Apple. These companies are exposed to increased political risks, potential digital tax and possibly, as regulation pressure picks up, break-ups. With a US presidential election looming in November 2020, the FTSE 350 offers some worthwhile shelter from these risks. 

 

FTSE 350 sector performances

Sector1-year change (%)
Leisure goods123.6
Tech hardware & equipment66.91
Electronic & electrical equipment31.89
Financial services30.4
Construction & materials29.57
Pharmaceuticals & biotech29.47
Electricity25.63
Support services25.09
Software & computer services24.94
Healthcare equipment & services23.53
Real estate investment services21.21
Household goods & 
home construction20.22
Tobacco19.81
Industrial engineering18.43
Real estate investment trusts18.31
General retailers17.1
Gas, water & multiutilities16.91
Beverages16.09
Media15.39
Food producers14.98
General industrials14.51
Aerospace & defence10.22
Travel & leisure9.43
Mining9.4
Life insurance8.74
Personal goods8.68
Food & drug retailers6.07
Mobile telecommunications5.67
Non-life insurance3.03
Industrial transportation-1.38
Oil & gas producers-4.91
Banks-5.13
Chemicals-6.9
Forestry & paper-10.39
Industrial metals & mining-18.91
Fixed-line telecommunications-26.02
Automobiles & parts-27.06
Oil equipment, services
distribution-28.97

 

Indices1-year % change
FTSE 1009.72
FTSE 25015.92
FTSE 35010.74
FTSE ALL SHARE10.77
FTSE ALL SMALL EX INV. TRUSTS8.95
FTSE FLEDGLING-1.95
FTSE AIM 1005.1
FTSE AIM ALL-SHARE6.21
Source: Thomson Datastream, 
data correct as at 23 January 2020

 

For our entire FTSE350 sector review click on each headline below: 

 

Sifting sectors to beat the market

 

Banks still squeezed

Asset managers need answers

Navigating the watchdogs

Life insurers' interesting times

Insurers braced for further claims inflation

Housebuilders in precarious position

Reit income prospects diverge

Real estate rebounds

Tough times ahead for general retailers, but there will be winners

Resilient clothing chains face tough environment

Supermarkets face rethink of non-food offerings

Food producers still looking for a turnaround

Casual dining sector will trade on intangibles

Reformulations and unholy spirits

The web is closing in on gamblers

New products, new regulations, new risks

Shame and disease plague tourism

Transport sector poised for rail shake up

Industrial transport looking for a boost

Government and Ofcom spurring telco investment

Streaming and streamlining

Build a defensive portfolio 

Mergers & acquisitions could boost software stocks

Engineering growth in 2020

Navigating challenges

No time to buy autos

Supermajors nowhere near ex-growth

Oil and gas services no shore thing

Miners flick switch to growth

Gold outshone by platinum group metals 

Business services slogs through uncertain environment

Constructing a slow recovery

Packaging getting greener

Pharma's big spending spree

Cautious optimism for UK healthcare

Chemical stocks need market revival

Clearer path ahead for utilities

Outsourcers making tentative progress