In the 1980s and 1990s, FTSE investors made fortunes as UK PLC boomed. However, since then, the FTSE 100 has experienced significant setbacks. The dot-com bubble burst in 2000, followed by various global events such as the 9/11 attacks, financial crises, wars, and the Covid pandemic, which have led to a loss of investor confidence. Over the past decade, UK shares have returned a modest 72 percent, falling behind Europe and the US.
At present, the FTSE 100 has slipped to around 7,500 and even Stocks and Shares Isa investors are giving up, withdrawing £40 billion from UK equity funds in the last seven-and-a-half years. The FTSE 100’s share of global market indices has reduced from nine to four percent. It is shrinking at a faster rate than popular consumer products.
Despite this decline, some experts believe that now may be the time to invest in UK shares. Laith Khalaf, head of investment analysis at AJ Bell, suggests that the FTSE 100 and FTSE 250, which invests in medium-sized companies, saw growth in July. The FTSE 250 jumped four percent following lower-than-expected inflation figures, which is seen as a boost for the UK economy and may slow the pace of base rate hikes.
Khalaf points out that recent poor performance could make UK shares attractive due to their low valuations. The average FTSE company trades at just 12.7 times its annual estimated earnings, compared to US firms trading at 18.5 times earnings. However, others advise caution. Ed Monk, associate director at Fidelity International, warns that it is important to consider whether companies can deliver earnings and if valuations can recover.
While the FTSE 100 may take time to prove its worth and begin growing, it is worth noting that shares listed on the index offer generous dividends, with a forecast yield of 4.4 percent next year. Despite the lack of growth, dividend yields are rising. Therefore, investors seeking income may find UK shares appealing, even in the midst of the market’s decline.
