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This month we have now seen one more all-time excessive for the blue-chip FTSE 100 index of main British shares. That has occurred on a number of events this 12 months.
But 2025 has been crammed with financial uncertainty from a plethora of causes, starting from geopolitical tensions to uncertainty about worldwide tariff regimes. In the meantime, the British financial system hardly seems to be like it’s at its healthiest ever.
So, why is the FTSE 100 on fireplace – and the way may buyers take into account reacting?
Heaps to love, however heaps to be involved about!
The FTSE 100 comprises a welter of various firms.
Some are targeted on the UK market, whereas others do most of their enterprise abroad. Some are in mature industries, whereas others have stronger development prospects. Some are pouring off enormous quantities of surplus money, whereas others are fighting their profitability.
So I don’t see a crucial contradiction between a sluggish-looking financial system and record-breaking FTSE 100 efficiency. Among the index’s companies have been performing solidly these days.
In the meantime, the character of the index and its quarterly membership opinions implies that companies with rising market capitalisations usually tend to keep inside it, whereas others with shrinking valuations can drop out of it.
However whereas the index goes gangbusters, wider financial efficiency in the end impacts the FTSE 100 over the long term. I nonetheless have some issues on this rating, though it could but set some additional new information in coming months.
The expansion outlook for the UK financial system stays unremarkable. Whereas the FTSE 100 stays low-cost relative to its US counterpart, its valuation not seems to be to me just like the doable discount it did a few years in the past.
Shopping for particular person shares
That’s one cause I’ve no plans to spend money on a FTSE 100 tracker fund.
However the primary cause is that I desire to purchase particular person shares relatively than an index tracker.
Whereas the FTSE 100 index has been driving excessive, not the entire shares in it have been doing so effectively.
For instance, take into account JD Sports activities (LSE: JD). Its share value is down 32% in only one 12 months. Ouch!
That’s not with out cause. As a buying and selling replace at present revealed, like-for-like gross sales for the primary half of the 12 months fell 2.5%. Alarmingly, like-for-like gross sales efficiency was worse within the second quarter than the primary quarter in Europe and the UK.
That might counsel ongoing weaker demand forward, although the corporate reported a stronger second-quarter development in Asia Pacific. North American like-for-like gross sales fell, however by lower than within the first quarter.
However like-for-like gross sales don’t inform the complete story. Because of opening extra retailers, the corporate’s whole gross sales proceed to develop.
It’s strongly worthwhile and its rising world footprint offers it economies of scale. With its in depth store opening programme of current years winding down, JD’s capital expenditure is about to fall, serving to profitability.
Though it’s persevering with to evaluate the doable affect of US tariffs, for now JD Sports activities expects this 12 months’s revenue earlier than tax and adjusting objects to be in keeping with analysts’ expectations. They presently sit within the vary of £852m-£915m.
Towards that, JD Sports activities’ market capitalisation of below £5bn seems to be low to me. I believe it’s one FTSE 100 share buyers ought to take into account.
