Interactive Investor

eyeQ: FTSE 100 is cheap but should you buy it?

interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to generate actionable trading signals. Here’s what it says about the underperforming FTSE 100 index.

27th February 2024 09:40

by Huw Roberts from eyeQ

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"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ

iShares Core FTSE 100 ETF (LSE:ISF)

Trading signal: strategic long-term model

Model value: 739.07

Fair Value Gap (premium/discount to Model Value): +1.69%

Model relevance: 48% 

Data correct as at 27 February 2024. Please click glossary for explanation of terms.

It’s tempting to assign the strong start to equity markets in 2024 to NVIDIA Corp (NASDAQ:NVDA). Tempting, but it’s not the full story. There are solid macro reasons why stocks are rallying too.

eyeQ’s smart machine shows that macro conditions are improving sharply for global equity markets. Over the last two weeks our model value for the S&P 500 has increased 4.95%. The Euro Stoxx 50 model has jumped 3.6% and Japan’s Nikkei 25 model has risen 5.1%.

The point being it’s not all about the AI revolution. Fundamental things like economic growth, inflation and what central banks are doing with interest rates are fuelling this bull move.

Except in the UK.

Over the last two weeks overall macro conditions for the FTSE 100 deteriorated and the eyeQ model value fell. Across all equity markets globally there were only two markets that experienced a fall, and sadly the UK was one. The Hang Seng was the other.

If you’re being charitable, the pace of the decline is slowing. Maybe macro conditions are trying to bottom out? But even if that’s true, the contrast with the gains seen elsewhere is stark.

But sadly, the bad news doesn’t stop there. The FTSE 100 has joined in the recent equity rally. The AI hype has lifted everything including UK stocks. But without an accompanying improvement in macro conditions, that rally leaves the FTSE looking rich to overall macro conditions (the price is above eyeQ’s model value).

Traditional metrics like price/earnings ratios show UK equities as cheap versus other markets. The hope is that international investors will start to see the value the UK affords and will come here hunting for bargains. That argument while true, is almost certainly something of a slow burn. It will take months, if not quarters, for that to start moving the FTSE 100 back in line with its peers.

In the meantime, the big picture perspective suggests caution is warranted. The FTSE 100 has been dragged higher by international markets, while its domestic fundamentals remain mixed at best.

There is a “but”. Our model for iShares Core FTSE 100 ETF GBP Dist (LSE:ISF), an exchange-traded fund that tracks the FTSE 100, has a macro relevance number of 48%, which means that macro is not the dominant driver of UK equity markets currently. Something else is more influential right now. That something else could be the lift AI is giving global equity markets.

But let’s put it this way, if you’re buying ISF here, you’re betting on momentum continuing to drag it higher. If you’re going to bet on momentum moving equities more than macro fundamentals, there are probably better options than the UK to choose right now.

eyeQ graph for FTSE 100 ETF

Source: eyeQ. Past performance is not a guide to future performance.

Useful terminology:

Model value

Where our smart machine calculates that any stock market index, singe stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.

Model (macro) relevance

How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.

Fair Value Gap (FVG)

The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.

Long Term model

This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 


We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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