EDITOR'S LETTERMerryn Somerset Webb
Newspapers usually don’t bother putting news about the stockmarket on their front pages unless something really exciting happens. This week, it seems something really exciting did happen. “Shares rocket to record highs”, said the Daily Express. “FTSE 100 hits all-time high”, said The Daily Telegraph and Daily Mail. “Like it’s 1999: soaring FTSE at highest level for 16 years”, said The Independent. Even the usually sensible Times wasn’t immune to the over-excitement: its headline on the matter was “investors’ delight as shares smash record”.
This is, of course, all nonsense. The FTSE 100 is a nominal index, not an inflation-adjusted index. Adjust for that – and if you want the numbers to mean anything relative to real wealth, you have to – and the index is nowhere near its past highs. In 1999 it hit 6,930. On Tuesday this week it ended the day at 6,949. But in the intervening 16 years, prices in the UK – as measured by the Retail Price Index (RPI) – have risen by more than 50%. So to beat its all-time high in any way that actually matters, the index would now need to be over 10,000. And that, clearly, is some way off.
Still, that doesn’t mean that investors who put money in a tracker fund at the market’s peak in 1999 haven’t broken even: add dividends in, says Adrian Lowcock of Axa Wealth, and the stocks in the FTSE 100 index have returned 66% in nominal terms since the peak – a real return of just over 1% a year. That’s better than nothing, of course. But as the Financial Times says, perhaps we should “keep the champagne on ice”.
So what next?
• Read the full editor’s letter here: Record-breaking? Hardly…