FTSE 100 at 9,000 - six key questions answered

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Does the strength of the UK economy matter?

As its name suggests, the FTSE 100 is made up of the 100 biggest companies listed on the London Stock Exchange. However, it is not hugely influenced by the performance of the local economy. This is because businesses in the index make over 80% of their revenue overseas¹. Indeed, some of the constituents, such as telecoms group Airtel Africa, make all their sales overseas.

The FTSE 250 has more of a domestic focus, with less exposure to global energy markets and more exposure to financials and real estate.

What other factors are driving its performance?

Currency plays an important part in the performance of the FTSE 100. If sterling falls, the index often gets a boost, as foreign earnings are suddenly worth more when converted to pounds. This was a factor in 2022, when the FTSE 100 outperformed its international rivals.

Using the same logic, a weak dollar is typically bad for the FTSE 100. This has yet to play out in 2025, however. The greenback is having its worst year since 1973, prompting questions about whether it will remain the world’s currency of choice - but the blue-chip index has kept rising.

How cheap is the FTSE 100?

UK stocks are notoriously unloved and - despite a good start to the year - they are still going cheap. A common way to gauge whether equities are good value is to use the price/earnings ratio. This yardstick compares a company’s share price with its earnings. At a very simple level, the higher the ratio, the more expensive the share.

Data from the London Stock Exchange shows that the S&P 500 trades on a future price/earnings ratio of 22.7 times. Europe is cheaper at 15.0 times, while the FTSE 100 is cheaper still at 13.6 times.

Meanwhile, the FTSE 100 offers the most generous dividend yield - as shown in the graph below.

How can I invest in the UK stock market?

Fidelity’s Select 50 offers five favourite UK funds, including actively managed funds and lower cost options that passively track the market. 

Here, we have pulled together a summary of the Select 50 views, as well as yields and costs, all correct at time of publication. The income yields are not guaranteed.

1. The FTF Martin Currie UK Equity Income Fund is one of three actively managed UK funds on the Select 50 list. Managed by Ben Russon, Will Bradwell and Joanne Rands out of Leeds, this fund aims to generate a higher income than the FTSE All-Share Index plus investment growth over a three to five-year period after fees and costs. It pays a quarterly dividend and currently yields approximately 4.6%, an amount that is not guaranteed. Its holdings include some of the UK’s largest dividend payers, including Unilever, Shell and AstraZeneca, as well as some mid-cap companies. It has an ongoing charge of 0.52%.
    
2. The Fidelity Special Situations Fund, run by Alex Wright, takes a contrarian approach and focuses on underappreciated companies. Owing to this, it offers an exposure to companies often not covered by other popular UK funds. Top 10 holdings include British American Tobacco and Imperial Brands as well as NatWest and Standard Chartered banks. It has a historic yield of 2.9% and an ongoing charge of 0.92%
    
3. The Liontrust UK Growth Fund invests primarily in companies listed in the UK, although it may invest smaller amounts into companies listed outside the UK too. The fund's approach has a 'quality' bias, leading it to buy companies that tend to be more expensive than others but with the potential to continue growing quickly. The historic yield has been lower than the other funds at 2.1% and it has an ongoing charge of 0.83%. This approach blends well with a 'value' fund such as Fidelity Special Situations.
    
4. The iShares Core FTSE 100 UCITS ETF is a passive fund, also known as an index tracker. It holds the individual constituents of the FTSE 100 in the correct amounts to track the index. Fidelity’s experts note that BlackRock is a seasoned investor in passive funds and that this fund’s cost are low. As such, it may suit cost-conscious investors with a longer time horizon. The yield is 3.5% and the ongoing charge is 0.07%.
    
5. The Vanguard FTSE 250 ETF is an index-tracking fund which invests in mid-sized companies listed in the UK. Vanguard is an expert in index tracking and this fund is well priced. It is focused on mid-sized companies and represents a sensible choice on the riskier side of a portfolio. Mid-sized companies can be more volatile and riskier than their larger counterparts. The yield is 3.8% and the ongoing charge is 0.1%.

Any of these funds can be held in an ISA or in our personal pension, also known as a SIPP. Or in the junior versions of these accounts. Here’s some links to helpful information:

• Fidelity Stocks and Shares ISA
• Fidelity Junior ISA 
• Fidelity Self-Invested Personal Pension (SIPP)
• Fidelity Junior SIPP

^{Past performance is not a reliable indicator of future returns}

Source: Refinitiv, total returns in local currency from 30.6.20 to 30.6.25. Excludes initial charge.

¹ London Stock Exchange, 5 March 2024