What’s going on with the FTSE 100 Index?

| July 23, 2021

The FTSE 100 crossed 7,100 points this month, pushing the index to a gain of 9.6% year-to-date. But the journey has hardly been smooth, with lots of volatile movement being recorded over the last seven months. But what’s behind this volatility? Let’s take a look.

What’s going on with the index?

The FTSE 100 index started last week relatively strong at just over 7,100 points. And for the first couple of days, it retained this high level. But as we now know, this didn’t last long. Due to a combination of falling oil prices and the weakening value of precious metals, the index began dipping.

Then a surge of investor uncertainty erupted following the UK reporting the highest rate of Covid-19 infections since last year. While the vaccine rollout has been progressing quickly, removing lockdown restrictions has triggered a third wave of infections across the country. And with fears of further economic disruptions caused by the pandemic, the index has since fallen to around 7,025 points today.

Not all companies in the index have been on a downward trajectory. Avast, the cybersecurity business, had achieved some formidable growth last week. Unfortunately, this was insufficient to offset the selling pressure from other FTSE 100 constituents.

Best performing companies of the FTSE 100

The FTSE 100 index started the year at 6,460. Royal Mail Group has been the lead performer this year with a 61% growth in its share price among all the blue-chip companies. The delivery service business has been able to take advantage of the favourable operating environment Covid-19 provided. After all, with over 750,000 retailers closing their doors, many individuals turned to online shopping for their retail therapy. But it wasn’t the only firm to thrive. 

Ashtead Group, the equipment rental service, saw its share price increase by around 60% since the start of the year. With businesses trying to reduce short-term spending to raise cash, renting tools and equipment has proven to be a popular and cheaper alternative to buying them.

Worst performing companies of the FTSE 100

Not all businesses can be winners. And there are a few that have significantly slowed the growth of the FTSE 100 index this year. Fresnillo is one such company. It’s the world’s largest silver mining business, but with the continued impact of the pandemic, the stock has fallen by 37% year-to-date. 

Just Eat Takeaway is another company on the worst-performing constituent list. With restaurants reopening their doors, the business’s favourable operating environment is coming to an end. This has brewed investor uncertainty, especially since its newly acquired American operations are not meeting performance expectations.

What’s next for the FTSE 100 Index?

FTSE 100 companies represent about 80% of the entire market capitalisation of the London Stock Exchange. The current year has shown some unexpected twists and turns for the index. But there are a few business giants that might turn this recent lacklustre performance around. EasyJet is one of those companies. The airline’s adoption of popular air routes with rising customer demand resulted in improved financials and better liquidity in its third-quarter report.

I also think Coca-Cola could have a marked difference on the index. The firm has reported strong financial results indicating an accelerated recovery in the post-pandemic era. As a result, the FTSE index has jumped and given a substantial boost to my portfolio. However, with infection rates rising, the direction of the FTSE 100 index could change like the wind. And so, for now, I’m thoroughly tracking the index.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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