Share prices have recovered from a five-year low to end the year with a Xmas rally. The FTSE 100 share index stands at over 5,400.
The FTSE 100 share index tumbled during 2008, following a global credit crunch and the collapse of the US bank Lehman Brothers. From a high of 6,456 in December 2007, it fell to 3781 in November 2008, a fall of over 40%. Although it recovered slightly at the start of 2009, by March it was at a five-year low of 3,512.
Year of recovery
In the months that followed, share prices gradually rallied. Some sectors were faster to recover than others – and some firms remain vulnerable – but generally there have been sustained increases across the board. Bank shares were among the most spectacular casualties of 2008/09 crash, with blue chip firms such as Barclays falling to 51.2p per share in January 2009 and HSBC shares falling to 304.1 in March. By October Barclays were back at 383.6 and in November HSBC topped 760. Lloyds and Royal Bank of Scotland (RBS) have been less resilient, but from 30.02p in March 2009, Lloyds is now at 50.03p and from 10.3p in January, RBS is now at 29.45.
Retail businesses have seen their share price rise from early lows this year too. Marks & Spencer‘s shares traded for 214 on 30 December 2008 but exactly one year later they have recovered to 400.9. In the same period, Next has gone from 1,081 to 2,065. Sainsbury’s shares went from 298.8 in March 2009 to end the year at 322, while Tesco went from 306.2 to 426 over the same period.
Long term investment
While a rise in prices is good news for shareholders, it also benefits other investors indirectly. Pension funds, unit trusts and other collective investments all benefit from market stability. As more people belong to defined contribution pension schemesor save in stocks and shares Isas, the movement of the FTSE is increasingly significant. Potential investors can perhaps take cheer from the season’s news but will also be reminded how unpredictable market trends can be. Those looking to invest large sums might do well to take professional advice and consider their options carefully. 2009 has ended well but who knows what lies in store for the year to come?
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