(Alex Spiroglou www.tradertd.com/TDS) makes a very interesting point
Most of the people are following the FTSE-100 as a bellwether for what the UK equity market is doing. It has staged an impressive comeback rally thus far.
Great …Should we pop the bubbly ?
The FTSE-100 is dominated by large multinational firms, whose operations are primarily outside of the UK. In fact – according to Credit Suisse- the constituents of the large cap index, on a collective basis make 75% of their income over the borders of Britain. For some firms included in the index (like the many internationally based miners, -say- a UK listed, but African based mining firm) BREXit will have very little effect.
Add the falling pound to the mix, that gives a big boost to the international operations of large cap firms. So a more representative view of what UK firms are doing is the FTSE 250. That is the index that follows the firms consisting of the 101st to the 350th largest companies. These are firms that base their income from operations IN the UK, and thus are a “fairer” picture of what the UK firms (economy) is doing.
The picture shown by the FTSE 250 chart – so far – is not so rosy. Likewise, the chart of the FTSE SmallCap index. Watching the performance gap between these three indices, will provide interesting information on the impact of BRExit on the UK Economy. Click to enlarge the charts