Between the last day of trading in 1999, and today, the index has halved in value and then slowly climbed its way back up, going through double-dip recessions and other struggles along the way. In many respects, the FTSE 100 can be described as a benchmark of the UK’s economic health. However, this is a somewhat simplistic view. The FTSE is a global index, and there are a huge number of multinational companies in the index. This means that while the FTSE will, to a large extent, be affected by the fortunes of the UK, there are many other things weighing on the index.
In 2014, the GDP of the UK increased by 2.6%, but the FTSE 100 actually contracted by 2.7% because of concerns about the economic slowdown in China, trading conditions in South America, the Greek debt, the Ukraine conflicts and the economy of South America.
So, while the FTSE 100’s current growth will boost the mood of UK investors, we cannot assume that the index is simply going to mirror trading conditions in the UK. The true picture if far more complex, and we need to pay attention to the economy of the world as a whole to get an idea of whether continued growth is likely.