Making money: what the experts think
● FTSE record highs
The FTSE 100 is on a roll. It hit its second all-time high in four days this week (7,934) as traders reacted to hints from the US Fed chair, Jerome Powell, that “interest rates could soon ease”, said Telegraph.co.uk. It builds on quite a surge. Traders have shrugged off increases in interest rates in the UK, US and eurozone, preferring to focus on the “less hawkish” pronouncements of central bankers. Even Bank of England governor Andrew Bailey (no stranger to gloomy language) appears to have “turned optimistic”, said Jill Treanor and Jim Armitage in The Sunday Times. He downgraded the severity of the looming recession (now predicted to last five quarters, not eight), even as he raised interest rates to 4%.
● Vices and virtues
There’s an argument that the FTSE 100, which defied the wider market slump in 2022 and rose almost 1%, has come into its own, said George Steer in the FT. It was once dismissed for its “Jurassic Park” mix of oil and mining groups, banks, insurers and consumer staples, and its lack of cutting-edge growth companies. But “these vices” now look “like virtues”.
The long-term performance of the UK stock market remains unimpressive. The FTSE is up just 14% since 1999, during which time the US S&P 500’s value has risen by twoand-a-half times. But that, said Neil Birrell of Premier Miton, adds to the Footsie’s attraction. “I’m surprised by how strong markets are in general right now, but I get it with the UK. There’s genuine value [in the FTSE]… and it’s cheap.”
● Home cooking
The odd thing, said John Stepek on Bloomberg, is that British investors continue to shun their “home market”. Data from Calastone suggests that investors pulled out nearly £870m from UK-focused equity funds in January – the 20th month in a row of “outflows” – and invested much of it elsewhere. It’s sensible for UK investors “to diversify globally”, but this “scale of revulsion” is “really quite impressive”. Perhaps the thesis that “the UK is ungovernable, and thus un-investable”, which became accepted wisdom following “a certain event” in 2016, has taken root. As Steve Eisman of Big Short fame points out :“it takes investors time to change their minds”. No harm in making hay while they do so.