The FTSE 100 is on track for its best year since 2021, returning 11.4% in the year to 6 December.
Few might have predicted FTSE 100 stock market index trackers to be among the top performing funds for 2024 at the start of the year, but the index has surprised many with double digit returns.
While the UK stock market is perceived to be struggling, with delistings and a dry IPO pipeline to contend with, Dan Coatsworth, investment analyst at AJ Bell, believes it “doesn’t deserve its unloved reputation”.
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“While it may lack the glitz and glamour of the US market, it’s still full of interesting companies offering steady earnings growth,” he says.
Illustrating that point, analysis from AJ Bell and ShareScope shows that, in 2024 to 6 December, 18 FTSE 100 stocks generated higher returns than the S&P 500.
“Anyone holding NatWest or Rolls-Royce for the entire year would have nearly doubled their money,” says Coatsworth. “18 FTSE 100 stocks have generated a total return in excess of 30% and approximately half of the index (48 stocks) has produced a double-digit return.”
Which FTSE 100 stocks have performed best in 2024?
The ten top performing stocks in the FTSE 100 this year are as follows:
| Company | Total return (%) |
|---|---|
| NatWest | 99.3 |
| Rolls-Royce | 95.7 |
| DS Smith | 87.8 |
| International Consolidated Airlines | 85.2 |
| Barclays | 79.3 |
| Beazley | 60.7 |
| Hargreaves Lansdown | 55.8 |
| 3i Group | 55.8 |
| Standard Chartered | 50.4 |
| Imperial Brands | 49.8 |
Source: AJ Bell, ShareScope. Data to market close on 6 December 2024. Total return with dividends reinvested.
The top-performing stock in the FTSE 100, Natwest (LON:NWG), has benefitted from the UK government reducing its holding stake and indicating that it is looking to exit completely.
“A major share overhang was lifted as the government accelerated the sale of what was a large stake in the business following a bailout in the global financial crisis,” says Coatsworth. “The stake is now less than 11% versus 38% a year earlier and the government has indicated it will be out completely next year.”
The second top performing FTSE 100 stock, Rolls-Royce (LON:RR), is enjoying multiple tailwinds, from increased military spending to the return to the old normal in the wake of the Covid pandemic.
“A recovery in the aviation industry has helped Rolls-Royce,” says Coatsworth. “The amount of time planes fly in the sky has a direct impact on the amount Rolls-Royce makes on spares and repairs contracts for a large installed base of aircraft engines.”
This has allowed Rolls-Royce and industry analysts to repeatedly increase their projections for the company’s performance, as CEO Tufan Erginbilgiç continues to execute the turnaround strategy set in motion by his predecessor Warren East.
“Upgraded earnings forecasts can be a powerful share price catalyst,” says Coatsworth.
Which FTSE 100 shares have performed worst in 2024?
There have, however, inevitably been some stragglers. The ten worst performers in the FTSE 100 index are as below:
| Company | Total return (%) |
|---|---|
| JD Sports | -36.4 |
| B&M | -31.4 |
| Croda | -30.8 |
| Frasers | -29.9 |
| Spirax | -29.4 |
| Vistry | -27.0 |
| Prudential | -23.7 |
| Schroders | -22.1 |
| Barratt Redrow | -20.1 |
| Mondi | -19.2 |
Source: AJ Bell, ShareScope. Data to market close on 6 December 2024. Total return with dividends reinvested.
“Admittedly, there were some duds as well,” says Coatsworth. “Quite a few well-known retailers hit a bump in the road, namely JD Sports, B&M and Frasers. Housebuilders struggled despite the introduction of a new government with pro-housing policies and interest rates starting to come down.”
Should you invest in the FTSE 100?
There is a certain degree of caution required when considering investing in FTSE 100 shares. As Coatsworth points out, certain sectors, particularly retail, are struggling. There are fears that the Autumn Budget could cause a resurgence in inflation, which would be a negative for the UK stock market.
Despite these risks, however, the FTSE 100’s returns year-to-date indicate that it offers investors significant potential.
Former investment manager Max King recently wrote in MoneyWeek that UK equities are set for a bull market. In a similar vein, Miranda Seath, director of market insight at the Investment Association, feels UK shares are currently undervalued.
“UK companies are fairly cheaply valued,” says Seath. “That’s always a bonus.”
These favourable valuations mean that while share price gains don’t always match the explosive rates of their American counterparts, FTSE 100 shares can be a good source of dividends and close the gap in terms of total returns.
“Fundamentally, the FTSE 100 can help provide ballast to an ISA or pension portfolio, particularly as the index has a rich source of dividends and a good mix of cyclical and defensive companies,” says Coatsworth.
One easy way to invest in the FTSE 100 is buying a tracker fund such as the Vanguard FTSE 100 UCITS ETF (LON:VUKE).