AIM hits the buffers
After more than two years of outperforming the wider markets, the AIM 100 index suffered a more severe decline than the FTSE All Share in H2 2018. The AIM 100 index declined by 22.3% in H2 2018 compared to a reduction of 11.6% for the FTSE All Share.
However, it was a tale of two quarters. In Q3, the AIM 100 registered an increase of 4% compared to a small reduction of 0.7% for the FTSE All Share. In Q4, the AIM 100 declined sharply, with a 25.3% reduction being more than double the losses in the FTSE All Share of 11.0%.
The market correction in October was driven by market worries over a cocktail of risks, including fears over the US – China trade war, increasing uncertainty around Brexit, rising US interest rates, the budget dispute between the EU and Italy and even the fallout from the death of the Saudi journalist Jamal Khashoggi.
The inherent volatility of London’s junior market is encapsulated in a comparison of its performance with the FTSE All Share over a five year period. For the first half of this period, AIM’s performance lagged behind the wider London markets but its returns over the last two years have been substantially better than the Main Market. However, when the bears return, the correction is more dramatic for AIM as shown in the last quarter.
Over the five year period, the overall performance of AIM is not too dissimilar to that of the wider market. The AIM 100 registered an overall increase of 11.7% for this period compared to 2.2% for the FTSE All Share. However, AIM does provide clever stockpickers with the opportunity to make particularly good returns (and avoid substantial losses).