FTSE All-Time High on a Weaker Pound

FTSE All-Time High on a Weaker Pound

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I joined "the city” (London financial district) in April 1998, when the FTSE 100 was flirting with the 6,000 level for the first time. Yesterday, it breached 8,000 some 26 years later. Luckily, I found other things to invest in over the years. The new high comes after the pre-pandemic high, which was brutal for an old economy stockmarket full of oil and banks.

It’s been a real struggle getting here, but a soft pound helped the FTSE over the edge. Currency weakness helps a little in the short-term, but devaluation is never a route to riches as shown by the lower chart, the FTSE in dollars. On that measure, the last high was in October 2007.

The FTSE 100, the Pound and the FTSE in US Dollars

Source: Bloomberg

The FTSE wasn’t the only market to peak back then. In that same month, we saw long-term highs for Asia and the emerging markets. There were also notable highs for Continental Europe and the USA. The big difference is that most of these places haven’t made new highs since. The US divergence from the world is the largest in history. See how many major markets have failed to deliver a single dollar of capital return since October 2007.

USA Surges While the World Lags

Source: Bloomberg

It’s an important consideration because here in the UK, we blame the government, the regulator, and everything else for our lousy stockmarket, but should we take comfort in knowing that we are in good company? I mean, China and the emerging markets are growing quickly, yet they still can’t seem to make a buck.

There were some indices that made progress but still not much compared to the USA. Indonesia, Switzerland and India all received silver medals, with Japan and Mexico receiving bronze.

Some Markets Made Progress

Source: Bloomberg

It is easy to see that the US stockmarket acceleration came courtesy of the pandemic, at which point, no one could keep up. The reason is simple: their big tech giants just kept powering on. In which case, the question becomes, how and why did computer and internet-related tech become a US monopoly? For that, we can certainly blame our governments and regulators.  

Still the FTSE made an all-time high, and that is mainly due to strength in banks and oil. Oh well.

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