FTSE 100: From Zero To Hero?

FTSE 100


The U.K. market remains an extreme laggard. Its progress since the dotcom bubble is breathtaking in a bad way.

Take a look:

The performance of the FTSE since the dotcom bubble is not good

Credit: ADVFN

There has been a reasonable flow of taxable dividends over this period, but it is no consolation when this kind of performance is happening elsewhere:

The FTSE compared to the S&P and the DAX

Credit: ADVFN

So now the U.K. and the rest of the world is hoping it is grinding itself out of the pandemic and as the Omicron variant fright seems to be dying down, what is in store for bargain basement Britain?

Takeovers are obviously on the way, and it appears that the government is on the edge of panic that it’s going to see its economic base strip mined. Not that this hasn’t gone on for years, but now with so many countries’ companies puffed up with free money and the U.K. market so cheap what happens next could be eviscerating. My feel is that the word is out the government won’t welcome big takeovers but it is only a matter of time before it kicks off.

Meanwhile, Brexit is not going the way it was promised. The world is not beating a path to the U.K.’s door to do trade deals, the EU is not playing nice, U.K. folks are not exactly happy they can’t jump over to the EU when they want for however long they like any more, and while drawbacks seem evident the benefits are nowhere to be seen.

The independent U.K. gambit however, has not failed; it simply hasn’t got going. It still could spring to life, but seen in context, British success has been in reverse for 100 years or more, so you don’t have to be too pessimistic to imagine a renaissance as being nothing but a fever dream. But for the investor, “so what?”

You would see a renaissance first in the stock market which is so laid low that any green shoots would poke up there very early on.

The U.K. can’t come good if the market is hanging out half price sale notices on its economy.

So this is the U.K. FTSE set up:

The FTSE 100 set up

Credit: ADVFN

Without any disasters, the FTSE should be heading to the top of the channel and then upwards and onwards. Yet without some kind of economic pivot, the FTSE problems are structural. Major economies have stock markets but many “B list” countries do not, or the ones they have are not material.

So the real outcome of Brexit will be foreshadowed on the London Stock Exchange. If the post-Brexit City withers, as it will without a major shift in U.K. policy, the market itself will wither alongside it. If the Brexiters begin to deliver on the Brexit dream then it will break out of its stultifying rut.

For the investor it’s a win-win. For a failing outcome, takeovers will be a feast, in an economic renaissance the sky is the limit for the stunted FTSE as a whole. As such FTSE takeover targets are an exciting prospect and there are many.