Record F.T.S.E.’s Future Uncertain

As the F.T.S.E. 100 reaches a record high, does history predict an upcoming slump?

The company F.E. Analytics has studied 3 major corrections that have occurred to the F.T.S.E. 100 following high points since 1999. The first saw a drop of 50.42% from a high of 6,930 on the 30th of December 1999 to a through of just 3,436 on the 10th of March 2003. The second saw a fall of 47.82% from a high of 6,730 on the 12th of October 2007 to just 3,512 on the 3rd of March 2009. Lastly a loss of 22.08% occurred from 7,103 on the 27th of April 2015 to 5,536 on the 11th of February 2016.

Market’s Cyclical Nature

The 3 corrections showed that the F.T.S.E. 100’s growth has experienced bubbles in the past but do they bear any similarity to what is happening today? The largest of the falls occurred after the dotcom bubble in 1999 whereas 2016/17’s high has been partly driven by a cheapening of the British pound.

Much uncertainty exists over the future direction of the index due to no clear picture of what a post-‘Brexit’ Britain will look like and little idea of how different sectors will adjust to the new era. Past predictions by official bodies such as the Bank of England have so far proved to be too negative.

Whether or not Britain secures a role for itself outside the European Union remains to be seen and is the biggest factor determining the direction the market will take. There has never been an event like ‘Brexit’ to draw conclusions from however, with the negotiations yet to take place there is likely to be some difficulties ahead. Even at its highest on the 16th of January this year there have been small intra-day dips indicating it may be nearing a peak but whether it plateaus or drops is less clear.

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