The Guardian view on UK stock markets: a long squeeze | Editorial

Discussion in 'Market News' started by Lily, Jan 3, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    The FTSE ended 2015 down, and remains lower than at the end of the 20th century. It may have been inevitable, but a long era of poor average returns will have effects that go well beyond the investing classes
    The image of last year was of a three-year-old boy washed up on a Turkish beach. He was an emblem of the huddled masses fleeing trouble in the Middle East, the greatest crisis in world affairs in 2015. Back in the UK, the story of the year was the re-election of David Cameron, which was rapidly followed by the unveiling of fresh benefit reductions, which redouble the effect of the deep cuts and burgeoning sanctions of his first administration. Amid so much hardship for the vulnerable at home and abroad, it might seem distasteful to worry about another of 2015’s losers: the London stock market.

    Yet as the markets reopen on Monday morning, the fact that the FTSE 100 closed down on the year, for the fourth time in a decade, has implications that could be felt beyond society’s trust fund tier. Sure, the rough 5% year-on-year drop can be partially explained away by pointing to the UK’s mining and fossil fuel giants, corporates for whom an oil price collapse, which is a boon for the wider economy, is instead a bane. It is also important, and soothing to the interpretation, to factor in the continuing value of dividends, which sweeten share investments even when prices fall. But it is nonetheless remarkable that shares have no more benefited from a recovery, which has gathered pace these last 12 months, than British benefit claimants. All the more so because UK interest rates have been kept at record lows. In the past, cheap money would have drawn funds into shares and pushed up prices, by increasing their attractiveness compared to bonds or cash. Not this time, however. By late 20th-century standards, animal spirits and expectations for future profits remain anaemic.

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