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Up to now, 2025 has been a banner 12 months for the FTSE 100 index of main British shares.
The index has repeatedly hit new all-time highs. But regardless of that, it nonetheless appears comparatively low-cost when set aspect by aspect with its US equal.
Nevertheless, the US and UK are completely different markets. Whereas New York’s inventory exchanges play host to the world’s greatest tech corporations, London’s blue-chip index incorporates numerous long-established corporations in mature industries that supply restricted development prospects.
Not solely that, however the UK economic system is wanting more and more sluggish to me. Tax and Nationwide Insurance coverage rises have been cited by dozens of listed corporations this 12 months as a purpose for rising prices consuming into revenue.
JD Sports activities’ interim outcomes this week warned of “continued stress on client funds“, though beforehand the retailer had shrugged off weakening client sentiment. Different corporations have already been feeling this pressure for a while.
So, might the FTSE 100 be in for a fall – and the way can I place my portfolio to arrange?
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’d 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 tough, if not downright inconceivable. Even when a market appears overvalued, it might probably keep that approach for years and even a long time.
On condition that I don’t assume the FTSE 100 appears clearly overvalued proper now, it might probably hold rising for a very long time but. Or not.
Right here’s my method
What to do, then, in such a scenario?
My technique is predicated not on investing within the index, however on selecting particular person shares to personal.
A weakening economic system may be dangerous for the FTSE 100 total, however it could provide alternatives for some corporations inside it – and out of doors it.
For instance, with shoppers tightening their belts, I believe the surroundings might turn out to be 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 12 months.
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 current 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 client items. That might recommend that its worth proposition for customers has turn out to be much less enticing.
However I reckon that’s fixable – and the chief govt appears to, as properly. With a big retailer property, sturdy model, and sizable buyer base, I believe B&M has numerous strengths to construct on.
It stays worthwhile and the dividend yield is 5.7%. So, hopefully, I’ll earn some useful passive revenue whereas ready for the share worth to get better.
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 observe.
