Interactive Investor

FTSE for Friday: playing catch-up with international rivals

UK stocks have largely underperformed overseas peers, especially since the pandemic, even when dividends are factored in. Independent analyst Alistair Strang updates his price targets for the FTSE 100.

9th February 2024 07:24

Alistair Strang from Trends and Targets

Our exercise, taking a glance at how things have gone since the pre-pandemic highs, dropped us into an interesting area of analysis. For instance, the FTSE 100 is currently stalled, almost exactly at pre-pandemic levels. But the DAX is 81% above levels when it all went wrong and the Dow Jones is 75% higher. Even France is 80% higher than its level prior to the pandemic drop.

But what really surprises us to a degree is how the FTSE 100 is behaving. It hit the level of the markets at the start of 2022 and this sort of thing will generally provoke some stutters, the markets rarely missing the chance to pretend a glass ceiling exists.

The S&P500, when it ran into this illusory barrier back in 2020, hesitated for almost four months before accelerating upward. Even France in 2021 hesitated for the entire month of March! But the FTSE has stuttered around the 7,500 point level for a record breaking 25 months.

Australia is an unusual case, currently at 7,615 points and 10% above its pre-pandemic level, managed to spend a couple of years wasting everyone's time, pretending it was about to go up. Now, thankfully, the index has started to achieve some higher highs, making us suspect it has now entered a longer term cycle to an eventual 8,300 points.

But the UK continues to languish, failing to achieve any sort of lasting break upward. The situation now demands the index better 8,047, the high in 2023, before we dare believe some proper growth is underway.

Actually, for the UK, the situation is far worse as there’s a problem which dates back to 2017. Visually, the FTSE 100 has spent most of the last seven years flapping around between roughly the 7,000 and 8,000 point levels, aside from the 2020 drop.

Source: Trends and Targets. Past performance is not a guide to future performance.

Near term for the FTSE, we’re not overwhelmed with optimism and instead suspect movements below 7,593 shall provoke reversal to an initial 7,567 points with secondary, if broken, at 7,624 along with some hope for a rebound. If triggered, the tightest stop is almost suspicious at just 7,620 points.

If the market intends to behave itself, above 7,620, ideally not with an upward spike in the opening seconds of trade, should place the market in a position where recovery to an initial 7,665 works out as possible.

Should such a level be exceeded, our secondary works out at 7,689 points and possible hesitation. The market needs better than 7,725 to suggest a break through the Blue downtrend, potentially changing the rules and making 7,757 a distinct possibility sometime in the future.

Have a good weekend.

Source: Trends and Targets. Past performance is not a guide to future performance.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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