I’ve been writing here for a long time that the UK’s FTSE 100 was a good prospect for a positive change in fortune. Its performance has been so utterly lamentable in comparison to the US, German and many other indecies that sometime soon its day would come.
This is generally an unpopular idea as while reversion to the mean is a semi accepted thing, in the markets the common advice is stocks that go down keep going down and are basically doomed to fail. As a contrarian I Know this is wrong but the converse that you should sit on winners and let them ride beyond all possible logic seems to have been fantastic advice for many years now.
As a contrarian that believes its good to buy low and sell high however the FTSE’s terrible performance for the best part of a generation is far to tempting for me to stay away from.
So while I’ve been going on about a renaissance, if you bracket out my tariff crash manoeuvres, the FTSE has been slowly but surely grinding a long up.
That’s good because being long this pile of underperformance has been a lucrative specialty for me for years and now the market is actually doing better than going sideways.
I’ve been calling 9000 for sometime and here we are.
Here is the chart to consider. (You know I like the long term)
As far as I am concerned this is a break out.
This is against a background of the lowest UK morale on record. I think even punk rock Britain had more spirit than right now, but for all the miserableness the market is running and 10,000 will happen fast if this is indeed a break out.
So let me add context.
There really isnt a huge reason why the FTSE cant reclaim some of that lost ground. (Well there is but if you look at it cold, there are plenty of things to go right)
Behind this break out story is money flow. Money is coming out of the dollar because it is too high and the White House wants it down or rather even if it doesn’t it want the dollar lower, it wants interest rates down and that amounts to the same thing. Seeing this money will flow out of dollar denominated stock into non-dollar denominated stocks of a similar nature, market and regulatory structure.
Volumes of US stock money flowing to London will spike shares there because the bottom line is, 1 Nvidia = the whole market cap of the London Stock Exchange and even the most novice investor will see a UK share that does the same thing at the same scale as a US stock is less that half as valued be unit of enterprise.
Which leads us on to another obvious point. Cheap UK shares are in the bargin bin and are getting picked off one by one by international companies. Takeovers get premiums, usually about 40% and that without the rise a share gets when investors smell blood in the water.
This is also grinding the market upwards.
Some people sneer when they hear, buy low and sell high, often because they don’t or because its hard to find low in many places in these liquidity juiced markets.
Well the FTSE is low, as low as a Chihuahua.