It must have been a wild March for the people FTSE 100 index. Recently, it has increased by more than 10%, reaching a low of 9,677 on Monday morning (March 23). For context, it was close to 11,000 in late February.
However, since Monday’s low, the index has started to recover. As I write (25 March), up to 10,077.
So, is the FTSE 100 back on track? Let’s talk.
Which is the latest?
Obviously the event that caused all the stock market uncertainty is the Iran war. Or, more specifically, the lack of shipping through the Strait of Hormuz.
If this continues for a long time, the worst inflation will be due to disruption of oil, gas, and fertilizer supplies. The current energy crisis is perhaps the worst in decades.
A study conducted by Vanguard earlier this month shows the economic damage that could be caused by the ongoing conflict. Europe (including the UK) and Japan are particularly vulnerable to higher oil prices.
As we all know, things are changing hourly with President Trump’s policies. The latest is that Iran has – surprisingly – rejected a 15-point plan from Washington to end the conflict.
Needless to say, it is too early to say whether the FTSE 100 is back on track. We still don’t know the damage of inflation on the UK economy or whether the US and Iran are talking.
Either way, interest rates are likely to rise in 2026. So investors are unlikely to be in the mood for high-risk assets.
But that may benefit the FTSE 100 to some extent, as it is cheaper and many regions pay bigger dividends (the index’s yield rose to 3.2%).
Others may be perfectly content to buy cheap FTSE 100 green chips, collect any gains, and wait for a possible snapback rally later this year. If so, investors can consider something like Vanguard FTSE 100 UCITS ETF.
Vision helps
When unexpected events like this happen, I think it helps to keep some perspective as a long-term investor.
For example, look at the chart below from Scottish American Investment Company (LSE:SAIN), or ‘THE SAINTS’. It shows how FTSE 250 The investment trust has issued inflation-busting dividends for decades.
There were many oil crises, recessions, and stock market crashes during this period. And some very scary geopolitical events. However, most of the stocks SAINTS has invested in have proven strong enough to pay increasing dividends.
And the stock market went up and to the right over time.
But is it worth considering the SAINTS today? I think it might be for investors looking for a solid dividend paying trust that aims to grow income over inflation. It has yielded 3.25%, increasing the payout for 52 consecutive years.
The top handle includes Taiwan Semiconductor Manufacturing, an apple, Microsoftagain Procter & Gamble.
That said, performance has been disappointing recently, and the ‘quality’ investment style of INTS is not popular. Last year, the stock price returned 6.8% compared to FTSE All-World IndexA total return of 14.7%.
If performance does not continue, additional investors could dump the shares, extending the current 8.2% discount to net asset value.
However, on balance, I think the potential rewards outweigh the risks. Last year, shareholders enjoyed a 7% increase in profits, double the rate of inflation.
