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Over the previous week, the FTSE 100 has fallen by 8%. In distinction, the FTSE 250 is simply down 6%. In fact, each indexes are decrease over this era. However by way of relative outperformance, the distinction helps my suspicions. I feel the FTSE 250 will proceed to do higher than the primary UK index for the remainder of this 12 months.
UK versus international publicity
It boils right down to the kind of companies contained in every index. The broader FTSE 250 is made up of smaller, home corporations. Extra of those corporations commerce simply within the UK, or have restricted publicity to the remainder of the world. The FTSE 100 incorporates extra worldwide companies. Some constituents hardly have any operations within the UK, however use it as a base for headquarters.
In consequence, the FTSE 100 is extra impacted by international occasions than the FTSE 250. The tariff announcement from President Trump final week is an ideal instance of this. The upper import levies negatively influence corporations that commerce with the US. But for home UK companies, it doesn’t actually matter an excessive amount of. Additional, for corporations that cope with China from the UK, phrases of commerce might get much more beneficiant as China and different nations look to offset commerce deficits with the US with extra commerce to different international locations.
Bringing all this collectively, the inventory costs of some FTSE 250 corporations have carried out higher than the worldwide FTSE 100 friends. I imagine this theme might proceed, as I don’t imagine the tariffs around the globe shall be rolled again anytime quickly. It’s a regime shift that I feel now we have to be comfy with being right here to remain.
The primary danger to my view is that if the UK financial system materially begins to underperform this 12 months. In that case, companies with income abroad could possibly be much less impacted than native corporations.
A home star
To this finish, an investor may wish to contemplate shopping for Greggs (LSE:GRG) shares. The well-known UK-based bakery chain doesn’t commerce in America, or anyplace else on this planet besides the UK!
In fact, this doesn’t imply the enterprise isn’t uncovered to exterior pressures. The share worth is down 40% over the previous 12 months. A part of that is right down to weaker shopper confidence. Folks reducing again on grabbing meals out will be attributed to UK-specific elements, however it may also be because of fear about what they see taking place around the globe.
Greggs has struggled with price inflation, akin to modifications within the Nationwide Residing Wage and employer’s Nationwide Insurance coverage contributions. This stays a danger going ahead.
Even with all of this, I nonetheless see it as an interesting inventory. Outcomes from 2024 confirmed income topping £2bn for the primary time, up 11.3% from the earlier 12 months. Underlying revenue earlier than tax rose by 13.2%. Based on the December 2024 YouGov Model Well being survey, it’s the primary food-to-go model for worth within the UK.
Given its home publicity and that it’s working with a confirmed worthwhile observe file, I feel it’s an concept for buyers to contemplate proper now.
