The winds of change lifted the UK stock market to new heights in 2024, as the FTSE 100 index recorded its strongest annual performance since 2021. London’s blue-chip index closed the year at 8,173 points, marking an impressive 5.7% gain despite facing economic headwinds and global market volatility.
Aviation Stocks Soar
Leading the charge were aviation stocks, with British Airways owner IAG and jet engine manufacturer Rolls-Royce both seeing their shares skyrocket by over 90% during the year. The resurgence in air travel demand post-pandemic proved a major tailwind for these companies.
Air travel and holiday stocks have been flying high, with IAG and Rolls-Royce soaring to the top of the UK’s performance charts.
– Matt Britzman, Equity Analyst at Hargreaves Lansdown
NatWest bank and packaging firm DS Smith also posted stellar gains of 82% and 77% respectively, rounding out the top performers on the index.
Turbulent Second Half
However, it wasn’t all smooth sailing for the FTSE 100. After hitting a record high of 8,474 points in May, the index encountered turbulence in the latter half of the year:
- August saw a brief plunge amid global market mayhem
- December brought weakness as investors fretted over sticky inflation hampering rate cuts
The index also lagged behind its Wall Street counterparts, with the S&P 500 surging over 23% and the tech-heavy Nasdaq Composite jumping nearly 30% in comparison. London’s relative lack of major technology companies weighed on its performance versus the US markets.
Retail Woes and Rejections
On the losing end, retailers struggled, with JD Sports shares tumbling 42% after bookending the year with profit warnings. Frasers, Ocado, and Burberry also faced the ignominy of being booted from the FTSE 100 as their market values declined.
Global Market Roundup
Looking abroad, Japan’s Nikkei and Germany’s DAX indices both posted solid 19% rises in 2024. The MSCI World Index added over 17%, with US election results and shifting interest rate expectations driving volatility.
2024 was no ordinary year, with elections around the world, persistent inflation and market volatility all playing their part in building an uncertain macroeconomic environment. Despite these challenges, markets continued to be resilient.
– Lori Heinel, Global CIO at State Street Global Advisors
The US dollar flexed its muscle on the currency markets, with the pound shedding 1.6% to around $1.253 while gaining over 4% against the euro to €1.207.
Eyeing the Horizon
As investors look ahead to 2025, the path for the FTSE 100 remains clouded by economic uncertainty. Sticky inflation and the scope for further interest rates hikes could create additional turbulence in the months ahead.
However, if the UK economy can navigate through these challenges and maintain its recovery momentum, the index could be poised for further gains. The resilience shown in 2024 despite the tough macro environment offers hope that blue-chip British stocks can continue to deliver for investors.
One thing’s for certain – after a year dominated by aviation stocks taking flight, market watchers will be keeping a close eye on which sectors will soar highest in 2025. Buckle up for another potentially eventful year ahead in the London markets.
