FTSE 100 Index: Share Price, Chart and Forecast
The FTSE 100 is the main index of the London Stock Exchange, and as such, is the easiest way for international investors to bet on the British economy. But it is also a popular instrument for short-term traders. This analysis will explain in detail what is the FTSE 100, its history, its composition and forecast. We will also explain how trade the FTSE 100 easily and cheaply.
What is the FTSE 100 Index?
As the main index of the London Stock Exchange, the FTSE 100 is one of the most followed stock market indices globally. In this section, we will provide you with all the information about the functioning and history of FTSE 100.
FTSE 100 Definition
The FTSE100, also known as the FTSE or Footsie, is the main index of the London Stock Exchange (LSE) since 1984. It comprises the 100 largest companies in the UK (the largest market capitalizations). It is an index whose composition changes quarterly according to the evolution of the weight of the different companies listed on the LSE.
The Financial Times Stock Exchange or FTSE is an important index for investors around the world, but especially in Europe, as it indicates the health of one of the largest economies in Europe: the United Kingdom. The FTSE Group includes other indices of varying importance such as the FTSE 100 Total Return Index, the FTSE 250 Index and the FTSE 350 Supersectors Index.
How is the FTSE 100 is Calculated?
FTSE 100 is calculated from an arithmetic average of the prices of the top 100 stocks, weighted by market capitalization. This means that not all stocks in the FTSE 100 have equal weight. The larger the market capitalization of a company, the greater its weight in the index.
The FTSE 100 is calculated continuously every trading day from 8:00 am to 4:30 pm and published every 15 seconds. A fall in the FTSE 100 means that the value of the UK's largest listed companies is falling. The FTSE reaching a new high means that the total value of all indexed companies is increasing.
FTSE 100 Index Today and History
The FTSE 100 history begins in 1984, when the index was first established in 1984, with a base level of 1,000. During the dot-com boom of the early 2000s, it peaked at over 6,930, but then fell back to about 4,434 due to the 2008 subprime crisis. The highest closing value of the index to date is 7,904, reached on May 22, 2018.
Over the years, the FTSE 100 components have changed dramatically, following company buyouts, mergers, and disappearances, which has only served to underscore the index's primary purpose of serving as a measure of market economic activity. Indeed, the level of the FTSE 100 index affects most people in the U.K., whether or not they are investors. This is because most pension funds are invested in UK equities and therefore the performance of the index will directly affect the level of return received.
The FTSE 100 stock index also reflects current international and economic events and often falls in response to falling markets worldwide. The first most significant single-day percentage decline was on October 20, 1987, the day after "Black Monday", when it fell 12.22%.
Finally, there has only been one day when the FTSE 100 index has not been calculated in its entire history. That was on October 16, 1987, after a hurricane caused chaos in England, and there were too few market practitioners at work to open share prices on the LSE's trading system.
The FTSE 100 Price Evolution
This section will be dedicated to the study of the historical evolution of the FTSE 100 share price.
FTSE 100 Chart
Below is the monthly FTSE 100 chart, on which we will base our observations.
The FTSE 100 chart above shows that the index followed a powerful uptrend from the early 90's, when it was around 2000 points, to a peak at 6930 points in January 2000.
The bursting of the dot-com bubble then led to a collapse of the FTSE 100, as was the case for most major stock market indices. In just over two years, the index halved in value, bottoming out at 3,613 points in March 2003.
The FTSE 100 then again showed an evident upward trend, peaking at 6750 points in mid-2007. The financial crisis of 2008 then reversed all these gains faster than they had been recorded, as the FTSE 100 was back below 3500 points in March 2009.
A decade-long upward phase followed for the FTSE 100, which scored an all-time high around 7900 points in May 2018. In 2020, the covid-19 pandemic then caused a sharp drop in the index, which made a foray below 5000 points in March 2020.
What Influences the Price of FTSE 100 Index?
Traders need to be aware of the factors that influence the FTSE 100 value in order to predict the likelihood of large movements. These include:
- Strength of the British pound: Nearly three-quarters of the sales of FTSE 100 companies are generated abroad. And when the British pound is weak, British goods are cheaper to buy, which can potentially boost exports - and thus raise the value of the FTSE 100.
- Earnings releases: Quarterly earnings releases from FTSE 100 companies can move stock prices and thus the value of the index. Since the index is weighted, a positive or negative earnings surprise in one of the top 10 stocks in the index, for example, can have a significant impact on the value of the index as a whole.
- Changes in interest rates: If interest rates rise, stock prices and index values can fall. This is because companies are faced with higher debt repayments, resulting in lower earnings.
The FTSE 100 Companies and Components
The FTSE 100 is a stock market index that contains stocks from all sectors. However, it is important to note that some sectors are more represented than others. For example, the oil sector and the financial sector each represent more than 18% of the FTSE 100 index. At the opposite, technology and telecommunications, two sectors that are over-represented in U.S. indices, have a minimal share in the FTSE 100.
In this section, we will discover more details about the main stocks of the FTSE 100, as well as how the FTSE 100 companies are chosen.
How Are the FTSE 100 Companies Chosen?
Members of the FTSE 100 index reflect the top 100 companies listed on the London Stock Exchange, and therefore changes to the list are made quarterly. However, if a takeover or merger has taken place between these quarterly meetings that would affect FTSE 100 companies, the index is amended accordingly.
The review of the FTSE 100 shares is simple: all companies listed on the London Stock Exchange and eligible for inclusion in one of the FTSE's UK indices are ranked in order of market capitalization or size. This ranking is calculated by multiplying the number of shares issued by a company by its current share price.
A committee of independent market experts meets four times a year, to consider which companies should be added, removed or retained in the FTSE 100 index. A system is in place to ensure that each review does not see too many changes. Indeed, the index must be kept relatively stable so that investors are not regularly forced to make costly and excessive changes to their portfolios.
FTSE 100 List of Stocks
Below is a list of the FTSE 100 list of the top 20 most important stocks included in the index.
|Unilever Group||ULVR||Personal Goods|
|Rio Tinto Group||RIO||Mining|
|British American Tobacco||BATS||Tobacco|
|BP||BP||Oil & Gas|
|Royal Dutch Shell A||RDSA||Oil & Gas|
|Royal Dutch Shell B||RDSB||Oil & Gas|
|London Stock Exchange Group||LESG||Finance|
|Reckitt Benckiser Group||RKT||Personal Goods|
Note that the 3 top FTSE 100 companies account for about 20% of the index.
Should I Trade the FTSE100? Points to Consider
The FTSE 100 index can be suitable for a variety of investor profiles. Let's take a look at what you need to consider when deciding whether or not to trade the FTSE 100 index.
- The volatility of FTSE 100 stock index is considered ideal by many traders. Indeed, it allows for significant gains in day-trading, while being limited by diversification.
- Speaking of diversification, the FTSE 100 index is one of the most diversified and, therefore, safest ways to invest in the UK markets.
- It is possible to trade the FTSE 100, with high leverage via most brokers, including ZFX.
- Trading the FTSE 100 via CFDs allows you to bet on whether the FTSE 100 will rise or fall, so you can also make money when the FTSE 100 falls.
How Can I Trade the FTSE 100?
It can be difficult to choose an online broker to buy FTSE 100, as there are so many. You need to ensure you choose one that has strong regulation, efficient and provides competitive fees. The broker ZFX ticks all these boxes.
ZFX also offers the MT4 trading platform, which is the most widely used globally thanks to its many technical analysis and automated trading advantages. It also provide various accounts with different leverages, so you can best tailor your trading experience. Finally, it is worth noting that ZFX offers its clients to trade stocks, indices, forex and commodities.
Trading the FTSE 100: An Easy Tutorial
Investing in FTSE 100 index through ZFX is simple and fast. Let's go through the steps in detail.
1 - Register with ZFX
First, go to the ZFX website, and click on "Open an account". Then, fill in the registration form with your personal details, including your phone number, which will be verified by SMS.
After filling out the form, click on the "Next" at the bottom. Immediately after this step, ZFX will display your MT4 login and password, and invite you to download the platform.
2 - Make your First Deposit
To do this, you will need to click on "Make a deposit" on the next screen displayed.
You will then be asked to choose a payment method, for example Mastercard.
You will be asked to indicate the deposit amount. Choose, then click on "Confirm Deposit". Finally, enter your credit card information before the final payment validation.
3 - Account Verification
Finally, it will also be necessary to proceed with the account verification by sending supporting documents.
As shown in the image above, you will need to upload the documents directly to the ZFX website.
4 - Trade FTSE100 index
Once ZFX validates your documents, you can then invest in FTSE 100. Download the MT4 platform offered by ZFX, login and follow the instructions given. You’ll then be able to select “UK100” and trade it as you wish.
Things to Know Before Investing in the FTSE 100 Index
Here are a few tips to keep in mind before you start investing in the FTSE 100.
- The FTSE opens at 8:00 am and closes at 4:30 pm local time, Monday through Friday.
- There are also derivatives, for example FTSE 100 futures, FTSE 100 CFDs, or FTSE 100 ETF that allow you to trade outside of official hours.
- Of all the ways to trade the FTSE 100, CFDs are the most convenient.
- If you want to trade the FTSE 100 share price in the short term, it will be essential to learn technical analysis.
- You should follow UK economic statistics on a daily basis – these can influence the index.
- Practice trading the FTSE 100 on a risk-free demo account, to develop and refine your trading method. Thankfully, ZFX offers a free demo account.
- Since the FTSE 100 is a weighted index, news about companies with the most points in the index can influence its price. It is therefore essential to follow the news of these companies.
- Make sure you look at the individual shares, to identify the FTSE 100 risers and losers.
FTSE 100 Index Future, Forecast and Predictions
Let’s now look at the future and predictions for the FTSE 100 stock index.
FTSE100 Forecast: Analysts Recommendations
FTSE 100 is a weighted index, so some stocks have a higher weight than others. Therefore, it seems interesting to look at the analysts' forecasts for the top FTSE 100 shares by market capitalization, namely AstraZeneca, Unilever and Diageo:
- For AstraZeneca, 12 analysts recommend buying the stock, and only one recommends selling. Moreover, the average target of these analysts implies an upside potential of 15%.
- Analyst sentiment is more mixed for Unilever, with 5 Buy recommendations, 4 Neutral opinions, and 4 Sell recommendations. However, the average analysts' target still implies a potential upside of 7%.
- For Diageo, 8 analysts recommend Buy, 4 Hold, and 1 Sell, with an average target implying a potential gain of 5%.
To summarize, analysts' views are bullish on the 3 largest stocks in the index, which is a positive indication for the outlook of the FTSE 100 itself.
FTSE 100 Analysis from a Fundamental Perspective
Unlike other indices that have already largely surpassed their pre-Covid-19 levels, the FTSE 100 stock still has some way to go. However, this lag on other indices suggests a buying opportunity.
Indeed, the British economy is starting to recover thanks to the development of vaccines. This should support activity in the country, and allow the FTSE 100 share price to reach new highs.
FTSE100 Technical Analysis
The technical context of the FTSE 100 is also positive.
The FTSE 100 chart that the index is following a strong uptrend since the lows marked in March 2020. As part of this rise, it has been able to break through its 50, 100, and 200 week moving averages, confirming a medium to long term bullish profile.
In addition, the 50-week moving average recently crossed above the 100-week moving average, which is a significant bullish signal. The crossing of the 50-week moving average above the 200-week moving average, which appears to be near, would provide an even stronger bullish signal.
Bottom Line: Is FTSE 100 a Good Investment Now?
The FTSE 100 is a stock index that will appeal to many type of investors. Short-term traders appreciate its reasonable volatility and the advantages that FTSE 100 CFDs offer, such as leverage or the ability to short. Others appreciate it as a diversified way to invest in the UK stock market. In addition, we have seen in this guide that the outlook for the FTSE 100 is favourable. Indeed, the economic recovery, the charting environment, or analysts' opinion all point to a bullish future for the FTSE 100 in the short and long term.
If you wish to take advantage of the FTSE 100's potential, you can trade it through ZFX, which offers competitive fees, high security and the MT4 trading platform.