Does the FTSE 100 offer good value for money?

Could the FTSE 100 (INDEXFTSE:UKX) deliver improving performance?

FTSE 100
FTSE 100

Having fallen by over 1,000 points since reaching a record high in May 2018, the FTSE 100 (INDEXFTSE:UKX) could offer good value for money in my view.

It has a dividend yield of around 4.7%. There are not too many occasions where its dividend yield has been higher than that according to my research, and this could suggest that it offers a margin of safety at the moment.

Of course, that’s from a long-term investment perspective. While it has gained over 1% so far today, the index continues to face a challenging near-term outlook in my opinion. This could mean that volatility and even a lower price level are ahead in the short run.

Recent data from China suggests that the world’s second-largest economy is experiencing a slowdown in its rate of growth. This could prompt a continued decline for the index due to its international bias, with China’s growth having been expected to catalyse the performance of the wider world economy over future years.

The full impact of rising US interest rates on the world’s largest economy is still unknown. Time lags may mean that recent interest rate rises have not yet had their full effect. With two further interest rate rises expected in 2019, investors may adopt a cautious stance towards riskier assets. This could mean that the FTSE 100’s performance in future months is compromised to some degree.

As a long-term investor, I think that the FTSE 100 is relatively appealing at the moment. I feel that it could become more attractive in the short run due to the risks that it faces. But with the index now having one of the highest dividend yields I can remember, and being priced at a significantly lower level than it was in the early-to-mid part of 2018, I’m optimistic about its prospects over an extended time period.

About Robert Stephens 5431 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page