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The FTSE 100 turns 40 – what’s changed and what’s next?

How much has the FTSE 100 changed in 40 years, what can we learn and what’s next?

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

The FTSE 100 index turns 40 this year.

Launched in 1984 as an index of the top 100 UK companies, it quickly became the most popular way of measuring the health of the UK stock market. To celebrate four decades, we’re looking back at the highs and lows, what’s changed since 1984 and what could be next.

Remember, past performance isn’t a guide to the future. Investments fall as well as rise in value, so you could get back less than you put in.

This article isn’t personal advice. If you’re not sure what is suitable, ask for financial advice.

How has the FTSE 100 performed?

Since launching to the end of 2023, the FTSE 100 has grown by 673% (excluding dividends and charges).

The index has seen its fair share of ups and downs, but still produced an average annual return of 5.2%. Beating inflation across the same period.

There’s been a fair share of volatility across the years. If you’re a new investor in the FTSE 100, you might not even know about some of its worst days.

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The worst would be 19 and 20 October 1987. The index had its biggest daily fall of -12.22% on 19 October and its third biggest daily fall on 20 October at -10.84%. They called them ‘Black’ Monday and Tuesday.

More recently, on 12 March 2020, £160bn was wiped off the FTSE 100 thanks to a -10.87% fall.

Drops like this can be tough to watch, but it’s worth holding your nerve and sticking to your long-term plan. The index often had some of its best performing days and years soon after these downturns although there are no guarantees that this will be the case in the future.

Impact of missing best ten days on the market after investing £10,000

Past performance isn’t a guide to future returns
Source: Refinitiv Eikon DataStream, to 31/12/2023.

In the bear market that came after Lehman’s collapse in 1999, between September and November, the FTSE 100 had four out of the five highest ever single-day price rises (8.05%, 8.26%, 8.84%, 9.84%).

While the index did recover eventually, 2008’s four strong performing days weren’t enough to save it from producing the worst single-year returns of -30.9%.

Since 1986, when further data started being captured, it has produced a total return of 2219% (excluding charges).

Worst three days

Best three days

20/10/1987

-12.22%

24/11/2008

9.84%

12/03/2020

-10.87%

24/3/2020

9.05%

19/10/1987

-10.84%

19/9/2008

8.84%

Worst year

Best year

2008

-30.9%

1989

35.1%

Who are the stalwarts of the FTSE 100?

The FTSE 100 has gone through a lot of changes since its launch, with over 500 ins/outs.

Of the original 100 constituents, 30 were still members in 2016 and 26 are still there after the latest changes at the end of 2023. This has really changed the face of the FTSE for a lot of industries.

Both communication services and energy have both lost weighting in the index over the past 20 years. Other industries, like financials and insurance have stayed strong by comparison.

Original constituents that are in the FTSE 100 index today

  • Associated British Foods

  • Aviva

  • BAE Systems

  • Barclays

  • Barratt Developments

  • BP

  • British American Tobacco

  • GSK

  • Imperial Brands

  • Land Securities Group

  • Legal & General Group

  • Lloyds Banking Group

  • Marks & Spencer Group

  • NatWest Group

  • Pearson

  • Prudential

  • Reckitt Benckiser Group

  • RELX

  • Rio Tinto

  • Sainsbury

  • Shell

  • Smith & Nephew

  • Standard Chartered

  • Tesco

  • Unilever

  • Whitbread

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Published: 5th January 2024