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To this point, 2025 has been a banner yr for the FTSE 100 index of main British shares.
The index has repeatedly hit new all-time highs. But regardless of that, it nonetheless appears comparatively low-cost when set aspect by aspect with its US equal.
Nevertheless, the US and UK are completely different markets. Whereas New York’s inventory exchanges play host to the world’s greatest tech firms, London’s blue-chip index comprises plenty of long-established firms in mature industries that provide restricted development prospects.
Not solely that, however the UK economic system is wanting more and more sluggish to me. Tax and Nationwide Insurance coverage rises have been cited by dozens of listed firms this yr as a cause for rising prices consuming into revenue.
JD Sports activities’ interim outcomes this week warned of “continued stress on shopper funds“, though beforehand the retailer had shrugged off weakening shopper sentiment. Different firms have already been feeling this pressure for a while.
So, might the FTSE 100 be in for a fall – and the way can I place my portfolio to organize?
Headed for a fall?
briefly, the FTSE 100 doesn’t look badly overpriced to me. Nevertheless, given the weak prospects for the UK economic system, I’d not be shocked to see it fall in some unspecified time in the future.
The difficulty that’s a lot much less clearer to me is when.
Market timing is notoriously troublesome, if not downright inconceivable. Even when a market appears overvalued, it could actually probably keep that approach for years and even a long time.
Provided that I don’t assume the FTSE 100 appears clearly overvalued proper now, it might probably maintain rising for a very long time but. Or not.
Right here’s my method
What to do, then, in such a scenario?
My technique is predicated not on investing within the index, however on selecting particular person shares to personal.
A weakening economic system might be unhealthy for the FTSE 100 general, however it might supply alternatives for some firms inside it – and outdoors it.
For instance, with shoppers tightening their belts, I believe the setting might turn into extra promising for FTSE 250 low cost retailer B&M (LSE: BME). But the B&M share worth has really tumbled 38% over the previous yr.
These days, the brand new chief government has made a number of substantial share purchases utilizing his personal cash. I additionally added some extra B&M shares to my present holding this week.
That fall partly displays Metropolis unease in regards to the firm’s outlook. It has been struggling to take care of not to mention develop gross sales of fast-moving shopper items. That would counsel that its worth proposition for buyers has turn into much less engaging.
However I reckon that’s fixable – and the chief government appears to, as nicely. With a big retailer property, robust model, and sizable buyer base, I believe B&M has plenty of strengths to construct on.
It stays worthwhile and the dividend yield is 5.7%. So, hopefully, I’ll earn some helpful passive revenue whereas ready for the share worth to get well.
Whether or not that occurs stays to be seen – however I’m assured that B&M is ready to enhance its enterprise efficiency. Hopefully, the share worth will observe.
