Tag Archive: FTSE 250

  1. Half Way Point of 2017 Check In

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    The first half of 2017 is over, where did that time go!  The last 6-months marked the end of another politically turbulent period in the UK. The view across the six months belies the upheaval that took place: the most widely quoted yardstick of the UK stock market, the FTSE 100, nudged up a little under 2.5%. Elsewhere, there were some sharper movement, as the table below shows

     

    30/12/2016

    30/06/2017

    Change in H1 2017

    FTSE 100

     7,142.84

     7,312.72

    2.38%

    FTSE 250

     18,077.27

     19,340.15

    6.99%

    FTSE 350 Higher Yield

     3,753.53

     3,768.50

    0.40%

    FTSE 350 Lower Yield

     3,709.13

     3,953.53

    6.59%

    FTSE All-Share

     3,873.22

     4,002.18

    3.33%

    S&P 500

     2,238.83  2,423.41

    8.24%

    Euro Stoxx 50 (€)

     3,290.52

     3,441.88

    4.60%

    Nikkei 225

     19,114.37  18,909.26

    -1.07%

    Shanghai Composite

     3,103.64  3,222.60

    3.83%

    MSCI Emerg Markets (£)

     1,305.65  1,455.96

    11.51%

    UK Bank base rate

    0.25%

    0.25%

     

    US Fed funds rate

    0.50%-0.75%

    1.00%-1.25%

     

    ECB base rate

    0.00%

    0.00%

     

    2 yr UK Gilt yield

    0.11%

    0.37%

     
    10 yr UK Gilt yield

    1.24%

    1.33%

     
    2 yr US T-bond yield

    1.16%

    1.38%

     
    10 yr US T-bond yield

    2.46%

    2.28%

     

    2 yr German Bund Yield

    -0.79%

    -0.57%

     

    10 yr German Bund Yield

    0.11%

    0.47%

     

    £/$

     1.2357  1.2990

    5.12%

    £/€

     1.1715  1.1389

    -2.78%

    £/¥

     144.1202  145.9505

    1.27%

    Brent Crude ($)

     56.75

     48.99

    -13.67%

    Gold ($)

     1,156.40

     1,242.25

    7.42%

    Iron Ore ($)

     79.65

     63.00

    -20.90%

    Copper ($)

     5,500.00

     5,954.50

    8.26%

    A few points to note from this table are:

    • The US market performed better than the UK, helped by the continued strength in a small number of big cap technology stocks. However, for UK investors on this occasion the dollar worked against them as it fell 4.9% against sterling over the period. The demise of the dollar can be blamed partly on fading expectations that a Trump bump would lead to a rapid rise in US interest rates
    • The FTSE 250, regarded as a better yardstick for UK plc (although still with a significant weighting of overseas revenues), was more resilient. The FTSE 250 breached 20,000 for the first time in May. However, it too succumbed after the election. With the FTSE 250 achieving almost 7% growth in the six months, the result has been that the FTSE All-Share (roughly 80/20 FTSE 100/FTSE 250) outperformed the FTSE 100 by almost 1%.
    • The FTSE 100 has been on a rollercoaster, peaking at 7,377 in mid-January, dropping to 7,099 by the end of the month, then rallying back up to 7,430 by mid-March before diving to 7,114 in mid-April (on the election announcement). Thereafter it rose again to 7,548 in early June on opinion poll optimism, with an inter-day high almost breaching 7,600 before descending in the wake of the voting reality.
    • Against the backdrop of the Eurozone’s continued monetary stimulus, the euro strengthened and continental stock markets posted a positive return. Some of that was down to political clouds clearing in the Netherlands and France as populists failed to gain power.
    • Bond yields headed upwards over the first half, except for 10 year US Treasuries. The Federal Reserve put through two rate rises, with a third likely after summer. In the UK, the June vote of the Monetary Policy Committee suggested that a UK interest rate rise may be nearer than had been expected. Statements from Mark Carney and Andy Haldane, the Bank of England’s chief economist, have spread uncertainty. For now, the notion that there will be no move in the UK until 2019 has been largely abandoned.
    • Commodities had a mixed first half, with gold responding to the dollar’s weakness. The most notable change was in the price of Brent Crude, which sunk back below $50 despite OPEC’s decision to continue production limits.

    A look at these six-month figures is a reminder of just how much day-to-day noise can hide what is – or is not – happening to investment returns.

     

  2. The FTSE 100

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    The FTSE 100 – the “Footsie” – is the UK stock market index which garners most of the headlines. It was launched on 31 December 1983 with a base value of 1,000. Today it is about 7,550, which equates to an average annual return (excluding dividends) of 6.2%.  RPI inflation over the same period averaged 3.5% a year.

    Two years after the FTSE 100 was launched, the FTSE 250 came on the scene to cover the 250 UK listed shares below the Footsie’s 100 large cap constituents. The FTSE 250’s base figure was 1,412.60, a number chosen to match the level of the FTSE 100 at the end of 1985. Last week the FTSE 250 broke through the 20,000 level for the first time.

    What looks like a massive outperformance, is not quite so great when subjected to the power of compound interest. The average annual return (again excluding dividends) comes to 8.8% whereas the Footsie over the same period achieved 5.5% (those first two pre-FTSE 250 years were good ones). Inflation from the end of 1985 comes in virtually unchanged at an average of 3.4%.

    The outperformance of the FTSE 250 is not quite as great as it seems because the constituents of the FTSE 100 have generally delivered a higher dividend yield (the FTSE 100 currently yields 3.66% whereas the FTSE 250 offers 2.64%). However, overall there is no denying that the FTSE 250 has trounced its larger counterpart. Look at the long-term graphs and the outperformance turns out to be something of a roller coaster:

    • The two indices performed quite similarly until 2003: on 7 March of that year the FTSE 100 hit a low of around 3,492 while the FTSE fell to 3,890 (11.4% higher).
    • By June 2007, just as the financial crisis was about to hit, the FTSE 250 peaked at 12,197, 81% higher than the FTSE 100’s 6,732.
    • The FTSE 250 took a big dive in 2007/08, bottoming out at 5,492 in November 2008, a decline of 55%. The FTSE 100 took longer to find its low of 3,531 in March 2009, down 48% from its peak. That low coincided with a figure of 5,831 for the FTSE 250, 65% higher than the FTSE 100.
    • Since that 2009 nadir the FTSE 100 has risen by 114%, whereas the FTSE 250 is up 243%.

    Some of the difference in performance is down to the different companies in the two indices. For example, the FTSE 100 has suffered from its exposure to commodities and energy (18.1% against 6.8% currently). A sector breakdown of the industrial sectors of the two indices can be found here. There may also be an effect that, as the top index, the Footsie’s constituents can look like companies that have reached the end of the small/medium company growth stages. 

    Comment

    The graphs can be rather misleading. Unless they are log-scale, a jump from 10,000 to 20,000 looks much more impressive than 3,500 to 7,000, even though both represent a doubling. On a price/earnings ratio basis the FTSE 100 is more expensive (30.04 v 22.46), but that is largely because the figures are historic, capturing the miserable performance of that all-important commodity sector in the last financial year. In terms of five-year volatility, the two indices were identical to the end of April according to FTSE Russell.

    Whether or not you view the FTSE 250 to be in bubble territory, its progress since 2009 is a useful reminder that there has been plenty of scope to outperform the main market index.

    For more information on the FTSE 100 or any other Financial Planning queries please call 01793 771093