1984 Britain is captive to a miners’ strike; Fans of singer Kate Bush are speculating about her upcoming album, and a stock market index has been launched – FTSE 100, which will soon become known as “The Footsie”.
Thirty-eight years later, major industrial stocks are back, and Kate Bush is back on the charts, and fans are hoping she will release new music.
Maybe worse – it’s still the best major index in the world. The Dow Jones was down 19 percent and the S&P 500 was down 24 percent.
Rio Tinto, Shell, Glencore and BAT together can distribute £ 23.4 billion in dividends
However, some fear that the relative resilience of Footsie may be short-lived. The Bank of England, city officials and leading economists believe the UK is heading for a recession.
In the US, similar warnings have been issued by Tesla CEO Elon Musk, economist Nouriel Roubini and Goldman Sachs chief economist Jan Hatzius. A recession in the US would exacerbate the grief here.
However, it should be noted that large enterprises included in the FTSE 100 should be better able to withstand economic storms while providing a profit. The average dividend yield on the index is 3.91 percent. This may not be commensurate with inflation, but there is potential for capital growth.
U.S. indices fell largely as a result of the impact of higher inflation and interest rates on companies that didn’t exist at the time of Footsie’s creation, such as Amazon and Netflix.
The use of Kate Bush’s streaming service Running Up That Hill in the drama Stranger Things revived interest in the star.
Footsie has suffered less because it has no such shares.
Sterling’s weakness has also made stock exchanges in London attractive to American players of private equity. The forward price-to-earnings (p / e) ratio of the index is 12, making it inexpensive compared to the Dow and S&P 500, whose p / e ratios are 17 and 20 respectively.
The decline in the pound after Brexit has led to an increase in the value of the dollar income of Footsie firms in sterling. As much as 75 percent of their income comes from abroad.
Rising dollar prices for oil and commodities helped Footsie.
Russ Mold of AJ Bell says these firms account for 22 percent of Footsie’s total valuation, 45 percent of its projected earnings and 34 percent of its projected dividends for 2022.
But, let’s not overlook the risks. Mold says: “The danger is that the recession is leading to the destruction of demand, falling oil and metal prices, entailing FTSE 100 revenues and dividends, which would mean that the market may not be as cheap as it seems.”
FTSE 100 skeptics note that the current 7190 level was just above the level of December 31, 1999, before the dotcom bubble burst.
But since then her companies have paid billions in dividends, and this year the dividends should be £ 81.2 billion and the share buyback should be £ 32.7 billion. Rio Tinta,, Shell,, Glencore and BATthe richest members can together distribute £ 23.4 billion.
All the good news for tools like Merchant Trust. This investment trust focuses on the highly profitable Footsie firms. Manager Simon Gergel says, “100 is trading well below the valuation of other developed markets, so we can find companies at a price lower than what we believe they are really worth. They can make a good profit. ”
If you avoid Big Tobacco, oil and miners for ethical and environmental reasons, Footsie may be unattractive. You may be more concerned with making money on any stock.
The way to reduce the dangers is to invest small amounts monthly in suitable trusts and funds – an approach that I like.
Options include low-cost index trackers such as iShares 100 UK Equity and Vanguard FTSE UK Equity Income or an active fund such as Troy Income & Growth that faces Footsie names such as Diageo but avoids oil and production.
Whatever you choose, you will hope that the economy will soon climb this hill.
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Can FTSE get back on track as singer Kate Bush?
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