Why has FTSE 250 fallen more than FTSE 100?

Published / Last Updated on 25/03/2022

In recent weeks, due to omicron, inflation and Ukraine, the FTSE 100 index has fallen just 3.68% below its year high whereas the FTSE 250 index is 13.13% below its year high (as at 18/03/22).  To understand why this is, we need to compare the two indices.

FTSE 100

FTSE 250

Comment

100 largest UK companies, collectively valued at £just under £2 trillion

Next biggest 250 UK companies.  101st to 350th largest, collectively valued at just below £420 billion

FTSE 100 companies are bigger, more established, and able to better ‘ride out’ volatility

76% of trade is done overseas on a global basis

49% of trade is overseas, mainly Europe and 51% is UK trade.

FTSE 250 better reflects UK and European economic concerns whereas FTSE 100 reflects the global picture i.e., not affected as much by inflation, interest rates and Ukraine

Slower recovery after lockdown rules relaxed in UK but not overseas, so lower growth rate post covid-19 lockdown

Higher growth after lockdown rules relaxed as domestic markets, on which they rely, started to trade more again

When the domestic economic outlook is good, FTSE 250 outperforms, when the domestic is gloomy compared to the rest of the World, FTSE 100 outperforms

Therefore, you may make a valid argument that when/if the energy crisis and a Russia/Ukraine peace settlement is reached, FTSE 250 will recover faster.  Is now the time to invest?

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