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Over the previous week, the FTSE 100 has fallen by 8%. In distinction, the FTSE 250 is just down 6%. In fact, each indexes are decrease over this era. However by way of relative outperformance, the distinction helps my suspicions. I believe the FTSE 250 will proceed to do higher than the principle UK index for the remainder of this 12 months.
UK versus international publicity
It boils right down to the kind of companies contained in every index. The broader FTSE 250 is made up of smaller, home corporations. Extra of those corporations commerce simply within the UK, or have restricted publicity to the remainder of the world. The FTSE 100 comprises extra worldwide companies. Some constituents hardly have any operations within the UK, however use it as a base for headquarters.
Consequently, the FTSE 100 is extra impacted by international occasions than the FTSE 250. The tariff announcement from President Trump final week is an ideal instance of this. The upper import levies negatively influence corporations that commerce with the US. But for home UK companies, it doesn’t actually matter an excessive amount of. Additional, for corporations that cope with China from the UK, phrases of commerce may get much more beneficiant as China and different nations look to offset commerce deficits with the US with extra commerce to different international locations.
Bringing all this collectively, the inventory costs of some FTSE 250 corporations have carried out higher than the worldwide FTSE 100 friends. I imagine this theme may proceed, as I don’t imagine the tariffs all over the world will probably be rolled again anytime quickly. It’s a regime shift that I believe we now have to be comfy with being right here to remain.
The primary danger to my view is that if the UK economic system materially begins to underperform this 12 months. In that case, companies with income abroad could possibly be much less impacted than native corporations.
A home star
To this finish, an investor would possibly need to take into account shopping for Greggs (LSE:GRG) shares. The well-known UK-based bakery chain doesn’t commerce in America, or anyplace else on the earth besides the UK!
In fact, this doesn’t imply the enterprise isn’t uncovered to exterior pressures. The share worth is down 40% over the previous 12 months. A part of that is right down to weaker client confidence. Folks reducing again on grabbing meals out may be attributed to UK-specific elements, but it surely can be as a result of fear about what they see occurring all over the world.
Greggs has struggled with value inflation, corresponding to adjustments within the Nationwide Dwelling Wage and employer’s Nationwide Insurance coverage contributions. This stays a danger going ahead.
Even with all of this, I nonetheless see it as an interesting inventory. Outcomes from 2024 confirmed income topping £2bn for the primary time, up 11.3% from the earlier 12 months. Underlying revenue earlier than tax rose by 13.2%. Based on the December 2024 YouGov Model Well being survey, it’s the primary food-to-go model for worth within the UK.
Given its home publicity and that it’s working with a confirmed worthwhile monitor file, I believe it’s an concept for buyers to contemplate proper now.
