The FTSE 100 ended Tuesday at 5,791 points, down 51 on the day. That’s a relatively small movement compared to some of the big ups and downs of recent weeks.
It came on the same day the government confirmed that we’re not getting any let-up in the Covid-19 lockdown this week. Oh, and after the Office for Budget Responsibility suggested UK GDP could fall by 35% in the second quarter, should the lockdown continue until June.
FTSE 100 economic boost?
Opening up the economy and boosting the FTSE 100 by loosening the lockdown rules seems far from a government priority. Chancellor Rishi Sunak has said: “Right now the single most important thing we can do for the health of our economy is to protect the health of our people.“
What might this all mean for the FTSE 100 over the next week, month, and longer?
For one thing, that suggested 35% figure for a possible GDP fall actually sounds pretty bright to me. If much of the economy remains suspended and non-essential businesses remain closed for the full quarter, I’d expect a bigger drop.
Worst since the 30s?
In fact, the International Monetary Fund has suggested we’re in for the worst economic decline since the Great Depression of the 1930s. And if that happens, any current FTSE 100 optimism could easily evaporate.
I also think I’m seeing excessive optimism from other quarters. One is the number of countries starting to relax their restrictions. New coronavirus cases do appear to be starting to flatten off in some of the worst affected places.
But loosening the lockdowns just when they’re starting to work could possibly prove disastrous. I’m no medical expert, but World Health Organization chief Dr Tedros Adhanom Ghebreyesus has warned that too quick a relaxation could spark a “deadly resurgence.” And I’d trust Dr Ghebreyesus before I’d take the word of an upbeat politician.
Pessimistic, me?
So does all of this mean I’m full of doom and gloom regarding the FTSE 100? Not a bit of it.
I do think it’s dangerous to be looking for next week’s big gain, and trying to dip in and out of short-term rises and falls. That can be a costly business at the best of times. But right now, with double-digit share price gains and losses almost every day, the temptation is surely stronger. And the danger is greater too.
Over the longer term, I’m as upbeat about the FTSE 100 as I’ve ever been. The UK stock market has, after all, beaten other forms of investing hands down over more than a century. That’s through the 30s crash, through two world wars, through a number of oil crises, and through the banking meltdown.
What FTSE 100 dips?
And look at the long-term stock market charts now and see what those disasters looked like. You can barely see them as blips in the relentless long-term rise of share prices.
So I say just keep on dripping your investment cash into your ISA, or SIPP, or whatever account you use. And keep buying great companies at fair prices. I say the FTSE 100 will almost certainly reward you well in the years and decades ahead.
