Market news today – FTSE 100 nears a new all-time high

Some context….

It’s probably worth pointing out, however, that at a new all-time high the FTSE 100 will still be less than 15% higher than the level it traded at in December 1999 at the peak of the bubble. The UK benchmark has been a relative laggard over the 23 years since then. During that same period, for example, the S&P 500 has risen by 150%. At last year’s peak, Wall Street had trebled since 1999.

But to be fair to the FTSE 100, it is a very different kind of index. With a dividend yield of 4% currently, the UK market pays out a lot more of its value each year to investors. Anyone who reinvested that dividend income rather than spending it would have enjoyed a much better total return than the headline level of the FTSE 100 would suggest.

What else is driving markets?

The other key driver of markets for the next few weeks will be corporate earnings. Profit forecasts have held up surprisingly well in the context of looming recessions on both sides of the Atlantic and even after recently reduced expectations, earnings are expected to be flat this year, with a bounce back still being pencilled in for 2024.

That may turn out to be too optimistic if, as expected there is a sharp economic slowdown this year. Recessions usually coincide with a fall in earnings so the expected profits path would be a serious outlier in historic terms. For now, the markets are still in glass half full mood. To stay that way, they need earnings to stay positive.

Five-year fund performance table

As at 13 Jan
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
FTSE 100 -7.3 15.2 -8.6 16.2 7.6

Past performance is not a reliable indicator of future returns

Source: FE, as at 13.01.23 Basis: Total returns in GBP. Excludes initial charge. 

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Written by Politixia

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