Is The FTSE Back On The Way Down After Its Year Of Gains?

The FTSE 100 looks to be struggling after a year of strong performance.

Is The FTSE Back On The Way Down After Its Year Of Gains?

It has recently become achingly apparent how much the UK’s dominant index is dependent on sterling’s value. In fact, much of FTSE’s gains since this past summer have been due to sterling’s devaluation.

Over the past week alone, the FTSE 100 has dropped by 3.2%. Alongside this, the financial worth of sterling opposite the dollar has gained by 2.1%, and if it continues to gain then we can assume more losses for the FTSE 100 could occur.

Uncertainty

It isn’t only sterling that is indicating agony for the FTSE 100. It reached a new high in March for plenty of reasons. First, the value of sterling against the dollar fell to a post-Brexit low. This resulted in the index being cheaper for buyers overseas and boosted earnings for constituents of the FTSE 1000 reporting in dollars. During this, markets worldwide celebrated Donald Trump’s victory in the US election. Trump’s $1tn proposed infrastructure programme and much publicised bonfire of regulation persuaded investors that the markets would go up.

This deluge of spending would certainly lead to high inflation, which would mean increased interest rates, along with increased economic growth. To help negotiate these changes, efficient back office systems for financial advisers are useful, such as those found at https://www.intelliflo.com/.

All these Trump-created benefits would be advantageous for most companies, in particular banks, which happen to comprise most of the FTSE 100.

However, none of Donald Trump’s promises have appeared, and some analysts speculate that perhaps they never will. Trump’s inability to push forward his healthcare reform could be a warning that expectations will not be met.

Investors

What does this involve for investors? Trump’s absence of political breakthroughs, together with an upcoming UK general election, Brexit and France’s election, will leave investors in doubt about the future. The trend shows downward movements in FTSE 100 performance after these events.

Unless the central banks intervene and pour more money into the system, uncertainty will likely propel the market into taking the easiest path – down.

Although the FTSE 100 looked to reach 8,000 a couple of weeks ago, now it looks as if the index will fall back by 20% as uncertainty encourages investors to shrink away from the risk.

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