The FTSE 100 is only a few percentage points up since its dotcom peak in December 1999, says James Yardley in the i newspaper. London is starting to resemble the similarly “hated” Japanese equity market, says Steven Andrew of fund manager M&G. “Places get this reputation from investors because they don’t make lots of money and they can be a bit dangerous if you own them at the wrong time.”
“For all the criticism aimed at the UK benchmark,” note that “the FTSE 100 has delivered an average annual total return of 7.75% since its inception in 1984,” says Investors’ Chronicle. True, that lags America’s S&P 500, but “it’s easily more than double the average UK inflation rate over the same period”.
What’s more, the London blue-chip index has been the best-performing major stock index so far this year (it has gone nowhere, while other global markets have plunged). “There is a certain irony in that the much-derided composition of the FTSE 100 is the main reason why it has held up reasonably well over the past six months or so.”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The FTSE 100’s weighting towards energy, mining and banking stocks have made it a refuge in the inflationary storm. By contrast, the FTSE 250, down almost 16% in 2022, has struggled owing to its greater weighting towards more cyclical industrial and consumer shares. The FTSE 100 bucks weakness in the UK economy because 80% of its earnings come from overseas. Analysts at Link Group think that sterling’s weakness should provide a £3.5bn-£4.5bn boost to total dividends this year; dollar earnings are inflated when translated into a weaker pound. A strong showing from miners helped push UK payouts to £37bn in the second quarter, the second highest figure on record. Link Group now expects headline payouts to climb by 2.4% in 2022 to £96.3bn.
“On a relative basis… British shares are incredibly well placed because we never had the bubble that America had,” Richard Buxton of the Jupiter UK Alpha fund told Danielle Levy in The Daily Telegraph. “We have some great companies… which are pretty cheaply valued. British shares offer a place to hide in difficult times in financial markets.”
Traders dislike Truss
The UK market could yet be heading for the odd bout of turbulence if Liz Truss is the next prime minister, however. “Truss’s policy platform… poses the greatest risk from an economic perspective… with an unseemly combination of pro-cyclical tax cuts and institutional disruption,” according to Ben Nabarro of Citigroup.
Truss is considering reviewing the Bank of England’s mandate to ensure it is tough enough on inflation, although she says this should not threaten its independence. The more predictable Rishi Sunak is the market’s favourite.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
