Merryn's Blog

Why you should watch M&S's share price

Marks and Spencer is not only a bellwether for Britain's retail sector, it's a pretty good indicator of the way the stockmarket's going, too.

What's happening on the high street? Ask Marks and Sparks. The clothes-to-food seller is seen as Britain's bellwether retailer. It sells enough stuff to know how consumers are thinking maybe more than all the 'confidence' surveys put together.

So today's news that UK like-for-like sales rose less than 1% over the year to 27 March hardly justified cracking open the champagne. There was the usual corporate guff about "strong foundations in place and core values intact", as Sir Stuart Rose hands over to new boss Marc Bolland. But the final dividend a sign about future confidence was left unchanged, following the one-third cut in the interim payout that caused rather a stir at the time.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

And though the company reckons the worst of the recession has now passed, it's worried about how bad next month's emergency budget will be. Overall the "outlook for the year ahead remains cautious".

No wonder the shares dropped 2% on the news, though to be fair, the FTSE is having a horrid day too. And with M&S down almost 20% in 2010, and yielding over 4.5% on a p/e of ten, some will argue it could even be starting to look good value.

Advertisement - Article continues below

But be careful. That doesn't mean the stock can't fall further. As John Stepek explains in Money Morning today, there could be more market woes in store. Indeed, Marks itself may be pointing the way ahead. Look at the chart below.


The red line is the FTSE All-Share index. The green line is the M&S share price but 'advanced' by six months. That's because over the last four years, where Marks has led, the rest of the market has followed some six months later.

So not only is the company a high street bellwether, it appears that it's a leading stock market indicator as well. In other words, investors could soon be applying the message from the M&S tills to their analysis of the overall prospects of UK Plc.

And this would be clearly bad news for FTSE bulls. Indeed, it rather suggests the falls we've seen so far could be just the start.



Stock markets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Stock markets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019

Most Popular

Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

Gold is at its highest level in years – here’s how to invest

Gold's rise at a time when the dollar is unnervingly strong isn't unheard of – but it is curious. John Stepek explains what's going on, and what it me…
21 Feb 2020
UK Economy

Britain’s economy might spring a surprise on the doomsayers this year

The UK economy is looking pretty good – we’re more at risk of a boom than a bust, says John Stepek. Here’s why, and what it means for your portfolio.
20 Feb 2020

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019