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.
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FTSE 100 |
FTSE 250 |
Comment |
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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 |
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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 |
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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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