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FTSE 100 Analysis and News

  • Recent FTSE 250 Outperformance Reversed Since Brexit
  • Brexit Outcome to Determine FTSE Outperformance

See our quarterly forecast to learn what will drive prices through the rest of the year!

Recent FTSE 250 Outperformance Reversed Since Brexit

Prior to the 2016 Brexit referendum, the FTSE 250 had typically outperformed the FTSE 100 with domestic 250 index enjoying the fruits of a stronger GBP. However, since the UK voted to leave the European Union the recent outperformance in the FTSE 250 had reversed with a plunge in the Pound benefitting most of the international companies that make up the FTSE 100. The reason being is that two thirds of the revenue generated among FTSE 100 companies are from overseas and as such, the weaker GBP means that profits from abroad are worth more in sterling terms.

FTSE 100 vs FTSE 250: Brexit Outcome to Determine FTSE Outperformer

Source: Datastream from Refinitiv. Annualised change between the FTSE 100 over the FTSE 250 in a 5-yr time frame, which is compared with GBPUSD, showing the effects that GBPUSD has on the performance of UK assets.

Brexit Outcome to Determine FTSE Outperformance

As Prime Minister May looks to reach a withdrawal agreement with the EU, investors with exposure to the FTSE will be focusing on the outcome which could determine where they park their cash. Given the historical performance of the FTSE 100 and 250 in relation to the Pound. An agreement could see the Pound surge, which in turn may see the FTSE 250 supported to a greater extent than the FTSE 100.

Overview

GBP Impact

FTSE Outperformer

Chequers Plans*

Facilitated Customs Arrangement & Single Market goods trade

Bullish

FTSE 250

Canada Plus Option (Hard Brexit)

Leave Customs Union, FTA for goods

Bearish

FTSE 100

Norway Option/EEA (Soft Brexit)

Stays within the Customs Union

Most Bullish

FTSE 250

No Deal

UK to trade on WTO rules

Most Bearish

FTSE 100

*Chequers plan possible rebrand to UK-EU FTA

BREXIT READING

KEY TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX