Picture supply: Getty Pictures
To this point, 2025 has been a banner yr for the FTSE 100 index of main British shares.
The index has repeatedly hit new all-time highs. But regardless of that, it nonetheless seems to be comparatively low-cost when set facet by facet with its US equal.
Nevertheless, the US and UK are totally different markets. Whereas New York’s inventory exchanges play host to the world’s largest tech firms, London’s blue-chip index comprises a whole lot of long-established firms in mature industries that provide restricted development prospects.
Not solely that, however the UK economic system is trying more and more sluggish to me. Tax and Nationwide Insurance coverage rises have been cited by dozens of listed firms this yr as a motive for rising prices consuming into revenue.
JD Sports activities’ interim outcomes this week warned of “continued strain on shopper funds“, though beforehand the retailer had shrugged off weakening shopper sentiment. Different firms have already been feeling this pressure for a while.
So, may the FTSE 100 be in for a fall – and the way can I place my portfolio to organize?
Headed for a fall?
briefly, the FTSE 100 doesn’t look badly overpriced to me. Nevertheless, given the weak prospects for the UK economic system, I might not be shocked to see it fall in some unspecified time in the future.
The difficulty that’s a lot much less clearer to me is when.
Market timing is notoriously troublesome, if not downright unimaginable. Even when a market seems to be overvalued, it may possibly doubtlessly keep that means for years and even many years.
Provided that I don’t suppose the FTSE 100 seems to be clearly overvalued proper now, it may probably hold rising for a very long time but. Or not.
Right here’s my method
What to do, then, in such a state of affairs?
My technique is predicated not on investing within the index, however on selecting particular person shares to personal.
A weakening economic system might be dangerous for the FTSE 100 general, however it could provide alternatives for some firms inside it – and out of doors it.
For instance, with customers tightening their belts, I believe the surroundings may turn into extra promising for FTSE 250 low cost retailer B&M (LSE: BME). But the B&M share worth has truly tumbled 38% over the previous yr.
These days, the brand new chief govt has made a number of substantial share purchases utilizing his personal cash. I additionally added some extra B&M shares to my present holding this week.
That fall partly displays Metropolis unease concerning the firm’s outlook. It has been struggling to take care of not to mention develop gross sales of fast-moving shopper items. That would recommend that its worth proposition for customers has turn into much less enticing.
However I reckon that’s fixable – and the chief govt appears to, as effectively. With a big retailer property, sturdy model, and sizable buyer base, I believe B&M has a whole lot of strengths to construct on.
It stays worthwhile and the dividend yield is 5.7%. So, hopefully, I’ll earn some helpful passive revenue whereas ready for the share worth to get well.
Whether or not that occurs stays to be seen – however I’m assured that B&M is ready to enhance its enterprise efficiency. Hopefully, the share worth will comply with.
