Friday, 9 January 2009

Is the FTSE 100 worth a punt?

No one could pretend that the economy is in a good state or that 2009 will be an easy year, but have we seen the worst of stock market volatility?

The UK stock market reached its low-point of 3,781 on 20 November, but since then it has shown remarkable stability and had climbed to 4,505 by close of business, Thursday 8 January. This is a rise of 19%. Is that making the headlines? Is anyone shouting from the rooftops? No, because good news doesn’t make for good headlines.

Yet if you had invested a thousand pounds of your money into a FTSE 100 tracker on 20 November, it would now be worth £1,190. And this is at a time when the Bank of England base rate has just gone down to 1.5%, and you can be sure that finding a savings rate of much more than 1% for a thousand pounds would be nigh on impossible.

The stock market appears to have rallied quietly in the last six weeks, and this may suggest an underlying feeling of optimism, despite all the doom and gloom that is about.

Let’s try a little experiment in the next month. Let’s pretend we put a thousand pounds into the stock market (e.g. a FTSE 100 tracker) on Friday morning (4,505 points), and we’ll see where it’s got to by Monday 9 February. We’ll compare that with a rate of 1.5% over a month, and we’ll see what happens!

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