The FTSE 100 index notched a record closing high of 8,884 on Thursday.
Index heavyweights Shell LON:SHEL, BP LON:BP., GSK LON:GSK and AstraZeneca LON:AZN nudged the blue chips over the line, but it’s the performance across the board this year that stands out.
The FTSE 100 has rallied somewhat against the odds with broad-based gains among its diverse membership of stocks. Fresnillo LON:FRES has enjoyed the best run YTD as silver and gold prices have soared.
British defence names Babcock LON:BAB (an Armchair Trader FTSE 100 tip in 2022) and BAE Systems LON:BA. take the silver and bronze medals with each rising on the geopolitical shifts taking place and expectations for more spending on defence. Britain’s decision to amp up its submarine fleet appears to have been a big boost as well. Rolls-Royce LON:RR. has also continued to perform nicely for investors this year.
The FTSE’s global footprint has also helped. Africa-focused Endeavour Mining [LON:EDV] and Airtel Africa LON:AAF have both rallied sharply this year and take fourth and fifth place.But we’ve also seen strong progress among financials including UK-focused Lloyds LON:LLOY and the more international Prudential LON:PRU.
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Why has the FTSE 100 gained?
“I think we have clearly seen a rotation in global equity markets as investors have for the first time in years questioned the TINATA – there is no alternative to America,” said Neil Wilson, UK investor strategist with Saxo Markets. “Investors are looking elsewhere and consistently conversations with clients revolve around geographic diversification and reducing exposure to the US.”
Of course there are alternatives to the UK – Wilson said we should note that while the FTSE is up over 8% YTD, the DAX has rallied almost 20%, but clearly the UK has picked more than a few crumbs.
More than this, the FTSE 100 has got some attraction from a value, income and defensive perspective given the volatility we have seen and changed macro backdrop and assumptions about US exceptionalism
- it’s offering some relative shelter with defensive names
- benefitting from flow dynamics as investors look beyond the US
- is enticing value-focused investors with relatively low multiples
- offers a good dividend income yield
- may be picking up a little juice from the government’s capital investment plans
for defence/energy/houses.
