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This month we have now seen one more all-time excessive for the blue-chip FTSE 100 index of main British shares. That has occurred on a number of events this yr.
But 2025 has been full of financial uncertainty from a plethora of causes, starting from geopolitical tensions to uncertainty about worldwide tariff regimes. In the meantime, the British financial system hardly appears to be like like it’s at its healthiest ever.
So, why is the FTSE 100 on fireplace – and the way may buyers contemplate reacting?
Tons to love, however tons to be involved about!
The FTSE 100 comprises a welter of various corporations.
Some are targeted on the UK market, whereas others do most of their enterprise abroad. Some are in mature industries, whereas others have stronger development prospects. Some are pouring off big quantities of surplus money, whereas others are combating their profitability.
So I don’t see a mandatory contradiction between a sluggish-looking financial system and record-breaking FTSE 100 efficiency. A few of the index’s corporations have been performing solidly these days.
In the meantime, the character of the index and its quarterly membership critiques implies that corporations with rising market capitalisations usually tend to keep inside it, whereas others with shrinking valuations can drop out of it.
However whereas the index goes gangbusters, wider financial efficiency finally impacts the FTSE 100 over the long term. I nonetheless have some considerations on this rating, though it could but set some additional new data in coming months.
The expansion outlook for the UK financial system stays unremarkable. Whereas the FTSE 100 stays low cost relative to its US counterpart, its valuation not appears to be like to me just like the attainable cut price it did a few years in the past.
Shopping for particular person shares
That’s one cause I’ve no plans to put money into a FTSE 100 tracker fund.
However the primary cause is that I choose to purchase particular person shares reasonably than an index tracker.
Whereas the FTSE 100 index has been using excessive, not the entire shares in it have been doing so properly.
For example, contemplate JD Sports activities (LSE: JD). Its share worth is down 32% in only one yr. Ouch!
That’s not with out cause. As a buying and selling replace at this time revealed, like-for-like gross sales for the primary half of the yr fell 2.5%. Alarmingly, like-for-like gross sales efficiency was worse within the second quarter than the primary quarter in Europe and the UK.
That might recommend ongoing weaker demand forward, although the corporate reported a stronger second-quarter development in Asia Pacific. North American like-for-like gross sales fell, however by lower than within the first quarter.
However like-for-like gross sales don’t inform the complete story. Due to opening extra outlets, the corporate’s whole gross sales proceed to develop.
It’s strongly worthwhile and its rising international footprint offers it economies of scale. With its intensive store opening programme of latest years winding down, JD’s capital expenditure is about to fall, serving to profitability.
Though it’s persevering with to evaluate the attainable impression of US tariffs, for now JD Sports activities expects this yr’s revenue earlier than tax and adjusting objects to be in step with analysts’ expectations. They at present sit within the vary of £852m-£915m.
Towards that, JD Sports activities’ market capitalisation of underneath £5bn appears to be like low to me. I believe it’s one FTSE 100 share buyers ought to contemplate.
