Should I keep investing in the FTSE 100?

The news is full of stories of Inflation, rate hikes, strikes, and failing companies that are ruining the British economy. I have seen the UK described as a small basket, and an extension of the UK stock market. Now, whether the British economy is in question or not is irrelevant to the point I am trying to make. That is, the stock market or market index is not always the same as the economy of the country. That is especially true of FTSE 100 index, which I still like to continue investing.

FTSE 100 near all-time high

The FTSE 100 reached 7,877.45 points on 19 June 2019. As mentioned, this is a record high. Currently, the index is below, at 7,764 points, but it has been close this week. Flirting with an all-time high suggests that the index, and by extension the company whose stock is making it up, is doing okay. What if the UK economy seems to be in the doldrums? Yes, around three-quarters of FTSE 100 companies’ profits come from outside the UK.

There is a variation of 100 or more between companies in the index. AstraZeneca earning about one-tenth of the profits in England. NatWest on the other hand get about 95% of the revenue on this coast. Many FTSE 100 companies report in sterling. Therefore, exchange rate movements will affect foreign earnings and thus stock prices. And the terrible UK economy is certainly not good for the FTSE 100, but overall, in terms of earnings, fortunes should depend more on what happens in the rest of the world, than what happens in the UK. .

Low performance index

Since March 2016, the FTSE 100 has underperformed the US S&P 500, the German Dax, and the Japanese Nikkei 225. The performance lag is mainly pronounced in the boom after the coronavirus global market crash in early 2020. Now, one interpretation of the low performance. i.e. the UK economy, especially the Brexit effect, has held back the index. However, looking closer, it seems that the FTSE 100 is holding up well while other indices start to slide in late 2021 and 2022.

I have had a lot to do with the makeup of the index. It is important to know what you are buying. The FTSE 100 is heavily weighted towards the financial, consumer protection and basic materials (mining) industries and is a value-oriented index. It is short on growth stocks and technology names in particular.

So the light in the growth has the last benefit. But that is probably not certain. So, while I am happy to continue to invest in the FTSE 100, in the form of individual stock options in my Stocks and Shares ISA, and through a tracker in my SIPP, I understand its strengths and weaknesses. Investing in it gives me exposure to the global economy, but especially in some, what can be called old-world industries. It’s not diversified enough for my stock portfolio, so I like to look outside the index as well.