UK share prices made an erratic start to 2021. But since March, the FTSE 100 has been on an upward path. The Footsie closed above the 7,000 level just over a week ago, for the first time since before the pandemic. But that didn’t last long.
By Tuesday this week, London’s top index was back below 7,000 after suffering its worst day in two months. So what made the optimism suddenly evaporate, and when will it be back? The sell-off was driven by fresh fears about the Covid-19 pandemic. Some parts of the world are suffering badly again, with India in particular devastated by a new wave. Here in the UK, I doubt there’ll be anything too drastic. But the PM did point out that “…the majority of scientific opinion in this country is still firmly of the view that there will be another wave of Covid at some stage this year“.
The FTSE 100 ended the week down 1.4% on 6,939 points. Travel-related stocks saw bigger falls. International Consolidated Airlines fell 4.6%, and Rolls-Royce Group wasn’t far behind with a 4% drop. TUI, though, was still making optimistic noises about summer holidays, and only suffered a relatively modest 2% loss.
What should I do?
So what am I doing about this week’s less-than-confident markets? In a word, nothing. The thing is, I am 100% convinced that the FTSE 100 will break through 7,000 points again, and will stay there. And that some time after that, we’ll see the 8,000 level tumbling, and then 9,000 and so on.
When will each of these arbitrary numbers fall by the wayside? I haven’t a clue. But as I’m investing for the long term, I really don’t need to have any idea about when such events will happen. As long as my shares do well over the next 10 to 20 years, and as long as I enjoy a lengthy stream of dividends, I’ll be happy. And it won’t matter a jot what level a wavy line on a chart reaches.
Why am I so confident that the FTSE 100 will carry on upwards in the long term? Because that is what it has always done. I know past performance is not an indicator of future performance and all that. But every time I feel in any way discouraged, I remember my favourite bit of stock market data. According to Barclays, which has been analysing stock market returns since 1899, £100 invested in UK shares in 1945 would have grown close to £180,000 today with all dividends reinvested!
FTSE 100 ups and downs
Saying that, I do like to see short-term ups and downs in the market. Well, it’s really the downs that I like. And that’s because they give me a chance to buy my favourite shares at cheaper prices. I mean, if we’re planning to keep buying shares for the next few decades, we want them to get cheaper in the short term, not more expensive, don’t we?
As an example, I’ve been examining iomart, the cloud computer services company. It looks like a long-term growth opportunity to me, and its shares are now cheaper. While I’m still buying, I do hope the FTSE 100 stays below 7,000 a while longer.
