The FTSE 100 index celebrates its birthday today and has now hit the big 4-0 after being officially launched on 3 January 1984.
The Financial Times Stock Exchange 100 (FTSE 100) Index is the primary benchmark for the performance of the largest companies listed on the London Stock Exchange (LSE). As the name suggests, it represents the top 100 companies by market capitalisation in the UK.
The FTSE 100 includes a wide range of sectors such as finance, energy, and consumer goods, and is generally viewed as a comprehensive measure of the UK stock market’s overall health and the country’s economic landscape.
The index is reshuffled on a quarterly basis, usually resulting in two or three stocks being relegated and replaced by stocks from the FTSE250.
Unfortunately, the FTSE100’s 40th birthday has been something of a damp squib in regards to its performance.
AJ Bell investment director Russ Mould described the celebration as “more akin to a quiet pint in an empty pub than anything more befitting of a major landmark”.
He said: “The index was flat after mixed trading in the US overnight, where tech stocks came under pressure. The so-called ‘Magnificent Seven’ accounted for a big chunk of the gains achieved by global stocks in 2023 and much will rest on their performance again in 2024.”
The index has risen from 1,000 to around 7,730 to provide a capital return of more than 670% over four decades. But the FTSE’s 40-year returns lag behind European and US peers.
Some 26 companies listed in 1984 are still in the index, and 15 have made gains over the past year. The biggest gainer was Marks and Spencer, up 115%.
Publisher Relx, first listed on the FTSE 100 as Reed International, has produced the largest share of market returns over the past four decades, closely followed by British American Tobacco and Rio Tinto.
Over the past two decades four names, JD Sports, Ashstead, London Stock Exchange Group and Diploma have regularly popped up as being among the biggest risers over key time periods. All four companies were in the top 10 performing stocks over the past 20 years, over the past 10 years and over the past five years, and all ended 2023 having gained double digits.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “As the FTSE 100 hits 40 it appears to be suffering a confidence crisis, feeling shunned by some investors, and seeing rival exchanges lure away its members. The Nasdaq and S&P 500 are the more mature and more successful players on the global scene, making huge strides over 2023, but even Germany’s DAX has risen 20% over the past year, while the FTSE managed to only climb 3.7%.
“There have been plenty of setbacks of recent years, including the Brexit hangover, UK political turmoil and inflationary headaches, which are partly to blame for a drought of big listings. But marking this milestone is an opportunity to assess the dependable credentials of this index, rather than wallow in pools of pessimism.
“The combined value of its constituents currently stands at £1.9tn, keeping it firmly near the top of the exchange pack. Investors should always have their eye on a long-term horizon and since its inception in 1984 up until the end of 2023, the FTSE 100 rose by 673%, outperforming gold and UK government bonds.”
