UK and US market snapshot: who are the standout performers so far this year?

interactive investor examines what has been moving markets in the first half.

Heightened volatility and uncertainty have been no strangers to global markets over the last few years, and 2023’s inflationary environment with an ever-growing recessionary risk in the background has certainly not helped calm anxious markets. 

But is it all doom and gloom? Today, experts from interactive investor, the UK’s second-largest investment platform for private investors, explore the highlights and lowlights from the first half of 2023, and outlines some examples of standout stocks, asset classes, and sectors which have managed to weather the storm best (and worst!)

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Markets showing progress, despite challenges 

Explaining why there may be reasons to be optimistic, Richard Hunter, Head of Markets, interactive investor, says: “Markets have generally made progress in a challenging half-year which has seen the constant wave of rising interest rates to battle inflation, turmoil in the banking sector following the collapse of Silicon Valley Bank, and a less than encouraging Chinese economic recovery after a promising start to the year.”

The UK market showing mixed signals 

Commenting on the health of the UK market in H1, Hunter says: “Having hit record highs in February at over 8,000, the FTSE 100 has retreated to stand up by just 1% in the year to date. A stronger sterling has worked against an index whose constituents mainly have overseas earnings, while the stability and defensiveness of the premier index fell out of fashion as investors returned to chasing higher growth stocks.”

Victoria Scholar, Head of Investment, interactive investor, adds: “Although the UK has managed to avoid a recession so far this year, the FTSE 100 and FTSE 250 have struggled. They have sharply underperformed the DAX and CAC on the Continent, which are both higher by over 10% each in 2023. For the FTSE 100, above-target inflation and rising interest rates have punished the UK housebuilders, and turmoil in the mid-sized US banking sector has hurt UK lenders.

“However, it is miners that have fared worst on the FTSE 100 in the first half of this year, with Fresnillo (LSE:FRES), Anglo American (LSE:AAL) and Glencore (LSE:GLEN) all at the bottom of the leader board. Especially following China’s bumpier-than-expected recovery post-Covid (and following a long zero-Covid policy).”

Who are 2023’s stock front-runners, so far?

But who are the winners? Victoria Scholar explains: “Rolls-Royce Holdings (LSE:RR.) has been star performer so far, up around 50%. Last month its new CEO, Tufan Erginbilgic, claiming turnaround plan is moving ‘at pace.’ 

“But actually, if we look overseas we see a more positive picture. US tech has enjoyed an incredible H1. This is particularly remarkable following the ‘tech wreck’ of last year, with big tech finally being able to breath a sigh of relief.

“In fact, the Nasdaq 100 logged its best first half ever, and Apple Inc (NASDAQ:AAPL) became the first company to reach a valuation of $3 trillion. Another star performer was NVIDIA Corp (NASDAQ:NVDA), which surged around 190% thanks to the buzz around artificial intelligence. Meta Platforms Inc Class A (NASDAQ:META) and Tesla Inc (NASDAQ:TSLA) also sky-rocketed by over 100%. And Palo Alto Networks Inc (NASDAQ:PANW), ADM, and Amazon.com Inc (NASDAQ:AMZN) also logging impressive percentage gains, landing them among the top gainers. Quite the turnaround story.”

Looking at the US more broadly, Richard Hunter adds: “The Nasdaq in the US has been a star performer, having risen by 32% this year, propelled by a handful of mega-cap tech stocks following a torrid 2022. This concentration of performance has been of some concern to investors given that it masks more pedestrian gains elsewhere in the US.

“That being said, the US economy remains on a growth trajectory despite the Federal Reserve’s aggressive interest rate hiking policy to date, and with the possibility of two more to come this year. Recent data, such as consumer confidence, GDP, housing starts and a falling jobless claims number, have all added to hopes that a soft economic landing can be engineered.

“Further promising recently came after all major US banks passed the Fed’s annual stress test. The report concluded that all 23 banks “are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.” With the current consensus being that the US is currently on course for a relatively soft landing, it is likely hoped that this acid test will not be necessary, while the comments should also put pay to the more recent banking turmoil.”

UK gilts take centre stage

Commenting on the bond market, and the rising popularity of gilts in the first half of 2023, Sam Benstead, Deputy Collectives Editor, interactive investor, adds:"Gilts yields rose, which is a result of prices falling, as interest rates increased more than expected to combat inflation. Because of this, recently we have seen shorter maturity bonds surpassing yields last seen during the October 2022 mini-budget crisis. The 10-year gilt now pays 4.4% compared with 3.6% in January, and the two-year gilt pays 5.3% compared with 3.6% at the start of the year. 

"An inverted yield curve, with shorter maturity gilts yielding more than longer maturity gilts, suggests markets think the Bank of England will have to keep raising rates in the short term, but medium term they will fall in order to stimulate the economy - so long as inflation is tamed. Only time will tell – but watch this space.”