The UK’s FTSE 100 share index turned 40 at the start of this year. Having started on 3 January 1984, this collection of the London Stock Exchange’s biggest companies has stood the test of time, but what did we learn from it on this anniversary?
One of the eye-catching highlights of this anniversary is the fact that 26 of the original companies are still in the index after all this time. Of those 26, 14 founding members still have the same name, including Lloyds, Barclays, Tesco, and Sainsbury’s.
Another 12 are still there under a different name, which covers the likes of British Aerospace changing to BAE Systems and Commercial Union turning into Aviva. The other 74 companies that were on the original list have disappeared from it, mainly because they’ve gone private or their market capitalisation is no longer high enough to stay in the top 100.
Only three of the original 100 members went bust. This was the fate of Ferranti, British and Commonwealth Shipping, and MFI Furniture. Many of the longest-established companies are also the most valuable, with 12 FTSE 100 members making up half its market cap. These big hitters include Shell, BP, and Unilever.
Strong Growth Over Four Decades
Despite some critics suggesting that the FTSE index has failed to innovate enough this century, the index has still shown strong growth throughout its first four decades. In terms of points, it’s grown 447% since the first day and has given a total return of 2,219% in 40 years. However, in the last five years, the UK’s premier index has fallen behind the faster-growing US S&P 500. The American index climbed 90% in that period while the FTSE rose by only 15% in the same time frame.
Will it continue to make fairly modest returns in the future or will there be a return to the late 20th-century glory days of the FTSE? This uncertainty helps explain why CFDs are considered by some investors, as shown here in the FTSE 100 product page by Libertex. This is a financial vehicle where investors don’t need to buy the underlying assets and that allows them to potentially benefit from the index rising or falling. The key is in predicting how much you think it will rise or fall by during a certain period.
It Now Has A More International Focus
A look at the original FTSE list reveals several long-forgotten names that bring a touch of nostalgia with them. When we compare the list to the current 100 names, we can see a more international flavour these days although it’s still dominated by firms with a British background.
82% of the revenue generated by these companies comes from overseas, with FTSE Russell pointing out how a weak pound is good news for businesses in this situation. Some of the companies with a long history in the country have been bought by overseas investors, as is the case with Boots and Cadbury Schweppes.
The last 40 years have been hugely successful for the FTSE 100. While there are clearly challenges ahead, the index has shown enough stability and resilience to suggest that it can adapt and remain relevant in the future.