Ever since the FTSE 100 reached a new high last month I’ve been meaning to write something about it. Well now I have, but as one of my semi-regular articles for BullBearings.co.uk.
To summarise (for the very busy):
- In 1999 when the FTSE 100 almost reached 7,000 it was trading well above historically normal valuation multiples (i.e. PE ratios were high and dividend yields were low).
- 15 years is a long time and during that time the aggregate earnings of the index’s 100 companies have continued to grow.
- The FTSE 100’s earnings and dividends have almost doubled in those 15 years, meaning the index is now only half as expensive, relative to fundamentals, as it was in the crazy days of the dot-com bubble.
There’s a bit more to it than that though, so here’s the full article: