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<\/p>\nThe mantra of the late 1990s was that markets always go up in the long run. It was wrong then, and it is wrong now.<\/p>\n
The FTSE 100 reached what was then its all-time high at the very end of 1999, during the height of the dot-com boom. What followed is a useful reminder of how fragile market confidence really is and why markets are a poor guide for economic policy.<\/p>\n
The FTSE 100 closed on 30 December 1999 at around 6,930.<\/p>\n
<\/p>\n
At the end of 1998, the index stood at roughly 5,880. In just twelve months, it rose by about 1,050 points, an increase of around 18 per cent.<\/p>\n
This was not driven by a transformation in productive capacity, wages, or public investment. It was driven by:<\/p>\n
None of those claims turned out to be true.<\/p>\n
From the December 1999 peak, the FTSE 100 entered a prolonged decline.<\/p>\n
By March 2003, the index had fallen to around 3,300.<\/p>\n
That represents:<\/p>\n
This was not a brief correction. It was a grinding, multi-year collapse that wiped out paper wealth, pension values, and investor confidence. And crucially, it took more than a decade for the FTSE 100 to convincingly exceed its 1999 level again.<\/p>\n
The chart noted above tracks the FTSE 100 from 1998 to 2005, using year-end levels. There are\u00a0three very clear phases:<\/p>\n
Even by the end of 2005, the index was still well below its 1999 high.<\/p>\n
This matters because it exposes some fundamental myths:<\/p>\n
The lesson is simple. Markets are a tool, not a guide. When we mistake speculative price movements for economic success, we repeat the same errors again and again. And that is what we are doing now.<\/p>\n
Tickets are now on sale for the Funding the Future live event in Cambridge<\/strong> on 28 February.\u00a0Tickets and details are available here<\/a>.<\/p>\n Comments\u00a0<\/b><\/p>\n When commenting, please take note of this blog\u2019s comment policy,\u00a0which is available here<\/a>. Contravening this policy will result in comments being deleted before or after initial publication at the editor\u2019s sole discretion and without explanation being required or offered.<\/p>\n","protected":false},"excerpt":{"rendered":"
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