Footsie finds its mojo as blue chips outshine global tech

Susannah Streeter, chief investment strategist at Wealth Club, said: “The Footsie has lost a little momentum after hitting a fresh intraday high but is hanging onto gains despite fresh geopolitical tensions and market turbulence elsewhere. The index appears to have found its mojo once again, with investors drawn in by its defensive qualities in a volatile world.

“There has been a surge of interest in London-listed blue chips after a raft of positive corporate results, amid an ongoing rotation away from volatile technology companies. Investors are gravitating back towards companies with tangible cash flows, reliable dividends and established pricing power, qualities the FTSE 100 has in abundance.

“Other exchanges have been hit by a wave of sell-offs as concerns spread about lofty chip stock valuations, growing Chinese competition and the huge AI spending commitments across the sector, but the Footsie has been standing strong. The tech-light nature of the index is insulating it from AI-focused jitters and its constituents are proving particularly resilient as investors seek out more stable returns amid the volatility.

“The internationally focused index is also benefiting from currency gyrations as investors await the next interest rate decision from the Fed, and while a hold is expected, a more hawkish tone is forecast given lingering inflationary pressures. With the dollar strengthening as more bets are placed on interest rate hikes this year, the pound is hovering around its lowest level in a month. That’s helping London-listed global firms which book a large proportion of their profits overseas.

“A raft of encouraging results from consumer goods giants Reckitt Benckiser and Unilever this week, alongside today’s bumper numbers from engineering group Weir, have all lifted sentiment. Mining stocks have also been pushing the index higher, with Glencore lifting four per cent on a surge in copper production – a metal in demand for the global electrification drive.

“Defence contractors continue to benefit from ongoing pledges to bolster military budgets, while energy giants are once again riding higher on elevated oil and gas prices. The index’s heavy weighting towards defence, consumer staples, mining, banks and energy means it’s more naturally positioned to benefit from the current geopolitical and economic backdrop. Its relatively generous dividend yield is also becoming increasingly attractive as investors look for returns they can bank rather than promises of future growth.

“The FTSE 100 is packed with companies with a big stake in the real economy, rather than the future prospects of a world dominated by AI technologies, and right now that’s where more investors are seeking shelter. Having been on the back foot for so long, the index is still considered to be largely undervalued, trading at a sizeable discount to US equities on earnings multiples, and if more shine comes off the biggest tech stars, it’s well placed to benefit from a swing towards more stability.”