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The last four weeks have left the FTSE 100 forefinger looking a bit bruised. After hitting an all-time high a month ago, the Footsie has fallen, especially in recent trade.
index fails
As I write, the blue-chip index stands at 7,406.87 points, up 0.9% today. At its all-time high on February 16, it peaked at 8,047.06 points. Thus, it has lost more than 640 points in four weeks, leaving it 8% below the top.
This latest mini-bust came after the fall of two tech-focused midsize US banks. When investors rushed to withdraw cash from the weakest US banks, this triggered a classic “run on the bank.” This panic soon turned into contagion, with UK bank shares taking a beating.
This is how the FTSE 100 has performed in the short and medium term:
| One day | +0.9% |
| Five days | -6.0% |
| One month | -7.6% |
| year to date | -0.5% |
| Six months | +3.0% |
| One year | +1.6% |
| Five years | +3.4% |
The Footsie had a strong start to the year, peaking at 8% above its December 30 close. But my table shows that the index has now posted a small loss in 2023. (All figures exclude cash dividends.)
Last month, I warned that the London market may have gone too far too fast on a wave of investor exuberance. And after the party came the obligatory hangover.
Am I worried about this latest bout of market weakness? You are welcome. In fact, as an averse value-seeking investor, I’m eager to buy even more stocks when they’re trading at a discount.
For me, these words of wisdom from investment guru Warren Buffett ring true: “Whether we’re talking socks or stocks, I like to buy quality products when they’re on sale.”
Bank stocks take a beating
As for undervalued stocks, UK bank stocks have been hit hardest in the FTSE 100. As investors painfully remembered the bank collapses of the 2007-09 global financial crisis, they rushed to sell their shares.
Here’s how shares of the top four UK banks have performed since the market peaked on February 16:
| Bank | Change from 02/16/23 | change of a year | five year change |
| barclays | -18.0% | -18.3% | -31.7% |
| HSBC | -9.5% | +13.2% | -20.9% |
| lloyds | -10.0% | -2.1% | -29.5% |
| NatWest | -13.8% | +10.4% | -6.2% |
My table shows price declines among the shares of the big four banks ranging from around one-tenth to almost one-fifth. While two bank stocks have risen in the last 12 months, all four stocks have fallen in five years. In short, it has been a difficult half decade to be a shareholder in UK banks.
I see deep value in the footsie today
Like I said, I’m not looking forward to the latest Footsie drop. In fact, as prices fall, I am excited by the opportunity to buy cheaper stocks in the long run.
Today, I view the FTSE 100 as the cheapest major market index, both historically and geographically. If I could buy the entire index at its current value (around £2.03 trillion), I would gobble it up with great pleasure.
Lastly, you would normally be buying cheap stocks left and right today. However, I am already fully invested in stocks. Also, I am eagerly awaiting fiscal year 2023-24 on April 6 before I put more cash on the market!
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