Let’s face it, the FTSE 100 has put in a pretty pathetic performance in the past five years, hasn’t it?
We’re looking at a measly 0.5% rise.
We’ve had a few crises in the past decade. There’s Brexit, an oil price crash, Covid-19, inflation, war in Europe, interest rates, global tension…
Same for all?
But the world’s other stock markets have had to cope with exactly the same things. Well, except for Brexit, which only harmed us.
But the point is, those other markets have wiped the floor with our dear old Footsie.
While the FTSE 100 has gone almost precisely nowhere in five years, the S&P 500 over the pond has pumped up by a very nice 60%.
Tech crash?
The Nasdaq Index of top tech stocks had a bit of a crash in 2022. But it’s still up a whopping 80% in five years. So much for the added risk of buying growth stocks, then.
Well, there is more risk, for sure. But to me, this suggests the way to deal with it is to ignore short-term market moves and hold for the long term.
European stocks have also beaten the FTSE 100. As has the Nikkei, even though Japanese growth has been chronically slow.
It’s all international
There’s one main thing that puzzles me. The FTSE 100 covers stocks listed in the UK, yes. But the companies behind them don’t just operate in the UK.
Pick any of the top 100, and the chances are we’ll find international businesses. Most are every bit as global as those in the S&P 500, or on any main index worldwide.
That tells me the FTSE 100’s poor performance has to be mainly down to UK investor sentiment, doesn’t it? What a glum lot we must be.
While those Americans look forward to future upbeat earnings reports, we sit here sucking our teeth, shaking our heads, and muttering “Don’t much like the look of that“.
Looking forward
Well, actually, I think some of us are as optimistic about the long-term prospects for stocks and shares as anyone either side of the ocean. Any ocean.
And we’re buying up as many super cheap FTSE 100 shares as we can while they’re down.
Future?
But what does the future hold?
Had the FTSE 100 managed the same rise as the S&P 500 in the past five years, it would have smashed well through the 10,000 level by now.
It would, in fact, be up around 12,000.
Sentiment change?
I don’t expect FTSE stocks to be as highly valued as S&P ones. History shows that just doesn’t happen.
But some estimates put the FTSE 100 on a forward P/E of only about 10.5. And that’s with earnings forecasts growing.
Even to return to a long-term average of around 15 would get us up above 10,000. So I reckon it’s just a matter of time, and I think a FTSE revival must come sooner or later.
It just needs all the sourpusses to wake up and smell the earnings.
