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Where the smart money is headed – FTSE 100 or FTSE 250?

The FTSE 100 (INDEXFTSE:UKX) has risen since the EU referendum, while the FTSE 250 has fallen. The key reason for this is the exposure of the stocks within the two indices, with the FTSE 100 containing companies that are more international and less reliant on the UK than companies listed on the FTSE 250.

Therefore, with investors being nervous regarding the future prospects for the UK economy following the referendum result, it’s logical that the FTSE 100 has gained a boost while the FTSE 250 has come under pressure. That’s especially the case since companies in the FTSE 100 are more likely to benefit from weak sterling, with a loose monetary policy over the medium term by the Bank of England as it seeks to boost the UK’s economic output.

This is because it will definitely produce a positive currency translation for companies reporting in sterling but operating abroad. Those companies are more likely to be trading in the FTSE 100 rather than the FTSE 250. Therefore, it would be of little surprise for the FTSE 100’s outperformance of the FTSE 250 in recent weeks to continue.

Risk Warning:

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Paul

The author Paul