FTSE back as investors buy British again
INVESTORS are rushing to buy UK shares again as the FTSE 100 surged past the 8,000 mark for only the second time ever yesterday, triggering hopes of a major revival in the months ahead.
London’s blue-chip index has underperformed for years, having been overshadowed by US technology stocks, but that has left it looking cheap.
Global investors have taken note with US private equity firms snapping up under-priced British companies, but now domestic investors are buying British again, as this year’s stocks and shares Isa deadline looms.
The number of private investors buying British stocks has jumped 10 per cent in the last three months as they sniff an opportunity, according to research from trading and investment platform eToro.
The site’s global markets strategist Ben Laidlaw said the UK stock market is now coming back from the cold, and positive sentiment is gathering steam.
British investors are now backing the UK market to outperform the US over next five years. “They are keen to get ahead of the game,” said Laidlaw.
Younger investors are particularly patriotic, with two in five aged between 18 and 34 backing the UK to outperform, while older investors are more sceptical, with less than one in 10 favouring the UK, reckoning the US and emerging markets will do better.
Yet the outlook is brighter as the Bank of England gears up to cut interest rates, with the first expected as early as May, although more likely in June.
Stocks listed on the FTSE 100 pay some of the most generous dividends globaly, with an average yield of 4 per cent a year.
This will look relatively more attractive once rates start falling, as this will drive down savings rates and bond yields.
Laidlaw added: “Reinvested dividends have historically accounted for the majority of total returns in the UK, and shareholder payouts are forecast to rise by 5 per cent this year, giving investors a rising income.”
Many are also wary of the socalled “Magnificent Seven” US tech stocks, Amazon, Apple, Microsoft, Meta, Tesla, Nvidia and Google-owner Alphabet.
They have smashed global markets for years but many now fear they look overpriced and their stellar growth may slow.
There are signs of this withTesla shares crashing 30 per cent in the first three months of 2024, and Apple down almost 10 per cent.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said the FTSE 100 surged yesterday, as new data showed UK shop price inflation dropped to a three-year low. “This raises hopes that inflation will fall back to target.”
Laith Khalaf, investment analysis head at AJ Bell, said as Friday’s deadline for using this year’s Isa allowance looms, investors can share in UK stock market success through a low-cost exchange traded fund tracker such as iShares Core FTSE 100 ETF or Vanguard FTSE 250 ETF.
Invesco High Yield UK, Jupiter UK Special Situations and the City of London Investment Trust are popular actively managed options.