The FTSE 100 has clawed back above 7,00019 Apr 2021 11:39
The FTSE 100 is only just above where it was in 1999
To say that the FTSE 100 has not been the world's best equity investment is an understatement. It has just gone above the 7,000 mark for the first time since February last year. That's a whopping 1%-or-so higher than the 6,930 point that marked its dotcom peak in 1999.
At first sight, that means the FTSE 100 has effectively gone nowhere in more than 20 years. Now, it's not quite that bad. The FTSE 100 is one of the world's most income-heavy stock indices. So you shouldn't judge it on capital gains alone.
But even if you account for dividends (and you should – note that Germany's index, the DAX, is a “dividends-included” index, for instance), the FTSE does not have a history of shooting the lights out.
For example, the FTSE's all-time record high came in May 2018, at 7,877. If you'd reinvested your dividends between the FTSE 100's dotcom-era high and its 2018 high, you'd have roughly doubled your money, even with the index itself barely rising in terms of capital value.
But doubling your money is a poor performance if it takes nearly two decades to do so, and it's much much worse when you look at what you could've won (to quote the late lamented Jim Bowen).
Obviously, in terms of major stock exchanges, the Nasdaq has been the place to be in recent years: it peaked at just under 5,000 in March 2000. It's now above 14,000.
But you don't have to go that far afield. Indeed, the far-more domestically-focused FTSE 250's dotcom-era peak was just under 7,000; its pre-pandemic peak was around 22,000 in December 2019. Today, it's higher than that. In other words, you've more than trebled your money (and that's excluding dividends!) in the same time that you've barely doubled it on the FTSE 100.
Anyway, after that 2018 high, the FTSE 100 meandered around for a while, before crawling to within touching distance of that record again in January 2020. We all know what happened then.
The question now is whether the FTSE 100 will play catch-up, or whether you'd still be better focusing on all of the indices that have already surpassed their pre-pandemic peaks.
That which was cheap shall be expensive
If we're talking about what's gone wrong, then from a global investor point of view, you can make an argument that Brexit definitely put a lot of big institutions off. They have a whole world of stocks to play in – if they can easily write off a small part of that universe then they won't have a problem with doing so. But, as you can see from the FTSE 250's performance, Brexit clearly isn't the whole story by any means.
One deeper issue is that the FTSE 100 does have a lot of stocks that are simply out of favour...
Read the whole of this article on the MoneyWeek website
Until tomorrow,
John Stepek
Executive editor, MoneyWeek
PS, we've looked at the market on several occasions in MoneyWeek magazine over the last few months. If you're not already a subscriber, you can get your first six issues abs
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