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.
-
What's next for Liberal Mark Carney after Canadian election winMark Carney will remain as Canadian prime minister after winning the country's election, despite falling short of a majority.
-
Review: Buckland Manor – a quiet stay in the CotswoldsTravel Buckland Manor is a true gem in the Cotswolds, hidden away from the crowds, says Matthew Partridge
-
Will FTSE 100 retailers Tesco and Sainsbury’s deliver further share price gains?Analysis After their recent strong performances, FTSE 100 retailers Tesco and Sainsbury's face a difficult future, but they are taking action to drive growth, says Robert Stephens
-
FTSE 100 closes at another record highNews The FTSE 100 has closed at another record high, but what’s driving the index’s performance and can the rally continue?
-
Best FTSE 250 dividend stocks for high yieldsMoneyWeek analyses the FTSE 250 dividend stocks that could offer investors the greatest yields in 2025
-
3 UK shares to buy yielding up to 17%Tips 3 UK shares top stocks to buy now, according to Alex Harvey of Momentum Global Investment Management.
-
Why UK firms should start buying French companiesOpinion The French are on a buying spree, snapping up British companies. We should turn the tables, says Matthew Lynn, and start buying French companies. Here, he outlines some potentially attractive-looking deals.
-
Upcoming IPOs in 2022: which companies are planning to list this year?News Rupert Hargreaves explains what an IPO is, how public and private companies differ, and picks out some of the more notable companies set to list on the stock exchange this year.
-
The markets say sell, but should investors listen?Analysis As fear grips markets around the world, investors need to have an honest conversation about what they’re comfortable with owning.
-
Low-cost index funds for simple investingTips Index funds are an easy, low-cost way for investors to invest in a sector or asset class. Here’s a selection of the cheapest passive tracker funds on the market right now
