Experts Questioning Relevance in the Digital Age
The FTSE 100, the UK's largest stock market index, celebrated its 40th anniversary yesterday. However, experts are now questioning its relevance in today's digital world.
A Changing Landscape
The FTSE 100 was launched in 1984, a time when traders used big mobile phones to give instructions. But now, with most share trading done by computer algorithms, the index's reputation is being called into question.
An International Index
David Buik, at Core Spreads, argues that the FTSE 100 is no longer a barometer of the UK economy. With 60% of its earnings being dollar or euro denominated, it has become an international index.
Underperformance and Lack of Tech Stocks
The index's 40-year performance has been lackluster, with a return of just 5.2% since its inception. One reason for this is the dearth of tech stocks, which are typically highly valued in the US market.
Surviving Companies
Only 14 companies have managed to survive with the same name since 1984, including Tesco, Unilever, and Barclays. Another 12 companies have remained, but with a different name.
Best and Worst Performers
Education publisher Relx, formerly known as Reed Elsevier, has been named the best performer over the past 40 years. A £100 investment in the 1980s would have made £35,493. On the other hand, NatWest has been the worst performer, with a £100 investment returning just £312.
A Look Back: Before the FTSE 100
Before the FTSE 100, there was the FTSE 300, established in 1935.
Conclusion
The FTSE 100 may have reached its 40th anniversary, but its relevance in today's digital landscape is being questioned. As share trading becomes increasingly automated, the index's role as a barometer of the UK economy is being challenged. Furthermore, its underperformance and lack of tech stocks have raised concerns. Only time will tell if the FTSE 100 can adapt and remain a relevant force in the ever-evolving world of finance.
Did you miss our previous article…
https://hellofaread.com/money/big-changes-coming-to-supermarket-websites-new-food-labels-and-buy-british-button/
