FTSE Crests 9000 points for the first time

The FTSE 100 crested 9000 points for the first time yesterday, marking a new all time high as global investors continue to reconsider US equities amid persistent uncertainty.

In reaching this milestone, the UK’s FTSE has managed to outpace its US and EU counterparts since the start of the year. 

It is clear that over the past few months investors have been on edge. 

More specifically, the beginning of Trump’s second term has riddled markets with uncertainty. 

Initially, investors expected Trump’s election to bolster US equity growth. This is unsurprising as Trump has previously relied on stock market performance as indicative of his performance as president. 

However, ever since a cascade of tariffs and trade disagreements, heightened tensions with Iran, Russia and even spats with long-standing allies such as the EU, Nato and Ukraine have ensued, confidence in US equities have wavered.  

The level of uncertainty can be seen through several financial indicators. For example, the Fear and Greed Index, which combines many indicators, reached a 3 year low of under 4 (out of 100). This represents ‘extreme fear’ in the market following Trump’s initial announcement of tariffs on ‘Liberation Day’.

Typically, this would be detrimental to the US market, but not necessarily beneficial for other markets as investors liquidate stocks in favour of holding cash, bonds or other safe haven assets.

However, because the issues of uncertainty are stemming from the US Government itself, traders have been given a reason to stay away from US markets specifically, rather than just equities more generally.

The most recent examples would be how Trump has begun to re-visit the idea of changing the Federal Reserve’s leadership, an institution traditionally independent from the government. 

So while it is clear that investors are likely to re-consider their US positions, why the UK in particular?

Two key reasons arise: tariffs and banking.

Ever since the outbreak of international trade wars, the UK has remained on good terms with the US, striking a relatively competitive trade deal with the US while being the first ones to do so. 

Neil Birrell, chief investment officer at Premier Milton, highlighted that this has allowed the UK to be “almost a ‘safe haven’ [that] gives a degree of comfort to investors“.

Another reason could be Europe's strong banking sector growth. 

The Financial Times labelled the European banking sector the ‘Magnificent 47’ earlier this year as they have managed to outpace the ‘Magnificent 7’ (the 7 largest US tech stocks) by delivering over 100 percent in returns since the beginning of 2022. 

While this could be seen as equally beneficial to the UK and the EU, it is important to note that the UK still acts as a global financial hub, with banking and financial services being some of its most significant and competitive output. 

This means that growth in the banking sector impacts the UK relatively more than any other European country, giving it a further edge over other countries in terms of stock market returns.