I couldn’t help but note the FTSE 100 chart this morning. I’ve reproduced it below, from the FT.
Now let’s get out of the way the fact that markets aren’t rational and stock indexes behave quite independent of economic reality, points I have made often.
But however you look at this graph you can’t call this a vote of confidence in the UK economy or the ConDem’s management of it:
What are the prospects for growth?
About zero, I’d say.
And the graph shows that the markets have no confidence at all that anything they’re doing will change that.
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Richard, seeing as a large number of companies in the FTSE 100 generate their earnings outside of the UK, I think using this index as a barometer of confidence in the ConDems is not valid.
I’d suggest a stronger indicator would be gilt yields, and the fact that 10yr gilt yields have dropped since the election would suggest market confidence in the ConDems.
However, as you point out, what do markets know???