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UK advertising giant, WPP, was once a great British success story. It may be hard to imagine now, but WPP’s market cap exceeded £23 billion back in 2016.
But in the decade that followed, the company went from one mishap to another. Right now, the whole company is worth, roughly, only a tenth of its peak market cap. Some assume WPP has fallen into a “bargain territory”.
But the market disagrees. Based on WPP’s share price trajectory, which is pointing firmly downwards, the size of the marketing firm is set shrink further.
One reason is AI. Creative works that once took hundreds of hours to create can be done much more efficiently. Clients have noticed. Unsurprisingly, WPP’s revenue is stalling, as are its earnings. The fundamental case for avoiding WPP is clear.
What is less clear, however, is whether the stock will go a lot lower from here.
Remember the stock is already down 75% from its late 2024 peak at 900p. This persistent decline has attracted plenty of short sellers, who are betting on a continuation of this fall.
But the stock is oversold and near major levels (200p). Therefore I wouldn’t rule out a technical rebound in the months ahead.
Many good points made by Richard, Darren and Sheldon above.
In the realm of asset allocation, the ‘allocation’ part is often a key driver of long-term returns. The other important part is of course the funds themselves.
How much you invest in each asset class determine the overall returns. When investing in funds, investors have to answer:
a) Is the fund’s allocation matching their risk appetite? b) Is this allocation in sync with their long-term investment views?
Take the Schroder Managed Balanced fund, mentioned by Richard above. According to its factsheet, the fund holds 74 percent of its asset in Developed Market equities and another 5 percent on Multi-Asset income. Commodities allocation is a small 2.5 percent.
While diversification is a core principle that all investors should adhere to, is the fund over diversified? It may be.
If you, for instance, allocate 10 percent of your portfolio to the Schroder Managed Balance fund, which itself is spread over 10 asset classes, whatever you choose for the other 90 percent will most likely overlap with that fund.
Moreover, a fund-of-fund does not allow you, as an investor, to express your long-term investment views fully, since the fund determines the broad allocation mix.
If you wish to take a more active role in fund investing, perhaps sticking to niche, ETF-type funds may be more appropriate.
For instance, you invest a percentage in global equities (VEU), another percentage to US (SPY) and US Tech (QQQ), another percentage to UK (ISF) and Europe (MEUD) equities, and then a portion to either regional or single country equity ETFs; and then a portion to bonds (TLT, IGLT) and gold/silver.
Passive, indexed vehicles like ETFs have lower costs than traditional funds.
The last point when investing in funds is this: What do you do when the fund is doing poorly?
In finance, fashion comes and goes regularly. Economic cycles push some asset classes deep into the red at some point. Think of bonds in 2022/3. When this happens, do you add, trim or just hold?
On the other hand, if a fund is doing well, do you add, hold or sell?
Strategic decisions like this are as important as funds selection. There are many ways to build a portfolio of funds. Having a plan, however simple, is critical when managing a portfolio of funds.
Many good points by Ed and Darren above.
I just add another point. Many of these newly-listed brokers tend to go through a ‘Boom-Bust’ cycle, where prices slump by 80-90 percent following their IPOs.
For example:
Coinbase (COIN) – $400 to $40 (-90%)
Robinhood (HOOD) – $80 to $8 (-90%)
WeBull (BULL) – $70 to $8 (-89%)et cetera.
eToro (TOR) is no different. Its share trend is just following the script of these financial stocks.
Perhaps investors are waiting to see if these stocks can survive a severe bear market before investing for the long term.
Who knows, the next bull market may result in a sharp price appreciation if ‘things work out’ for the broker. From their 2022/23 lows, COIN rose 10x while HOOD rallied 15x.
I would keep an eye on the stock and see if their fundamentals (revenue, margin, profits etc) are worthing buying for the long term.
The US stock market is in a league of its own.
At the time of writing, 12 out of the top 14 companies (by market cap) are American. Google (GOOG) is the latest tech company to hit the $4 trillion mark.
US Big Techs dominate many aspects of our daily lives, from social networking to shopping to tech gadgets. Their monopolistic platforms are extremely hard to dislodge. Profits have thus grew healthily, and steadily, for a decade.
To outperform the tech-dominated US market requires one key metric: higher profit growth.
For example, European defence stocks have outperformed many US stocks in the last two years because of higher European defence spending. The whole sector is expanding rapidly and earnings are set to grow.
Rheinmetall (RHM), a German defence company, soared 10x in ten quarters.
Another example is the commodity sector. Precious metal miners are enjoying bumper profits because of higher gold and silver prices. As a result, mining stocks soared.
Fresnillo (FRES), one of the largest silver miners in the world, soared 6x in 18 months.
Back to original question: Which market will outperform US this year?
My guess are markets and sectors that are currently on (or at the start of) a cyclical upswing where profit growth outlook are upgraded.
Look at Canada (Composite Index). The cyclical upswing in commodity prices is fuelling a strong rally there.
Japan, as suggested by Darren above, may also do well. But the rally there is tempered by sharply falling Yen.
Another index – Stoxx 50 – is hitting new long-term highs. It may do well as European mega-caps start to dominate.
Looking inside the US market, there are some relative plays for 2026. The small cap sector (Russell 2000, ticker:IWM) may outperform the Magnificent 7.
When silver is on a roll, it is best to stay out of its way.
The metal has a habit of churning around aimlessly for a long time until prices march resolutely northwards.
Has silver reached the climactic end? I’m not so sure.
To bet on the spread narrowing (long gold; short silver) is a bet on gold outperforming silver.
This may well happen in the future.
But in the meantime, one may need to guard against a further widening of the spread.
The relative trade could sink into a loss first before recovering. This consideration needs to be ironed out before initiating the spread trade.Indeed.
That’s the tricky part investing in US equities right now.
Many US stocks (not only tech) have gone up so much. Their valuation are at historic highs, which make them vulnerable to earnings disappointments in the year ahead.
If I were to start buying today with a highly defensive view, the universe where I’d pick one candidate would be filled with McDonalds (MCD), Coke (KO), or the rail operator Union Pacific Corporation (UNP). These are steady dividend payers with steady share prices. Defensive plays.
If some tech exposure is needed, I’d look at ASML (ticker:ASML), the dutch-based tech company. The AI-semiconductor boom may lift the stock further as the company holds some deep proprietary technologies. This stock is not cheap, though.
But again no tech stock is cheap these days.
Many good points made by Sheldon and Darren.
Will FTSE 100 hit 10,000? Chances are high – but not 100 percent – that the UK large-cap index will hit that five-digit mark sometime next year.
The more important question, though, is this: Will it stay there?
Chartwise, the index is in a strong position. The upside breakout this year is the first decisive, upward move in decades.
When a financial instrument rallies to new price highs, further gains are likely. This is the well-known “momentum effect” in stock markets. Strength begets strength.
If FTSE 100 ends 2026 in the black, it will the be the sixth annual positive return since 2021. This is quite a remarkable run.
Will we see a pullback below 10K once the Footsie reaches that milestone? That is also a possibility. Profit taking, an economic slowdown, or a crash in the AI bubble in 2026 – are all negative factors that may tank UK stock prices over the next 12 months.
For now, the base case is that FTSE 100 will continue to drift upwards, to new highs, over the medium term. Whether the index can close with another blue candle is harder to say.