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Despite recent sales, the FTSE 100 it still trades above 10,000 points. That would have sounded unthinkable a few years ago.
To me, this reflects a broader shift in global asset allocation. Capital circulates from many stocks with long-term commitments to companies that generate near-term cash flows.
Signal to re-rate Glencore
There is one old economic stock that sums up this idea of great circularity Glencore (LSE: GLEN). Its share price has returned to its 2022 high, despite weak earnings.
What stands out is not just the level of the stock price, but what it means. The market appears to view Glencore less as an earnings proxy and more as a cash-generating industrial goods business, with a focus on energy conversion metals.
That change is important. Even with earnings below the 2022 cycle peak, the company is still generating strong cash flow and returning cash to shareholders. That’s exactly what the market is rewarding right now.
Coal remains an important factor and continues to measure large profits, especially as prices have normalized over the past few years.
Broadly, integration in the sector remains a lively topic, with past integration discussions involving Rio Tinto highlighting how strategic positioning of copper and other precious minerals can drive the next phase of value creation in the industry.
When banks become money machines
HSBC (LSE: HSBA) is no longer just a ‘trade bank’. It is the global currency engine within the FTSE 100. National politics and regional risks drive short-term volatility, but often mask a more stable underlying story.
At its core, the bank operates in a structurally high interest rate environment. Even if central banks eventually eased policy a bit, rates remain above the record lows that defined the past decade.
That’s important because it supports steady interest income across its global deposits, particularly in Asia where most of its earnings power is concentrated.
In simple terms, HSBC doesn’t need rates to go up – it benefits from them staying ‘normal’ rather than going back to zero.
In addition there is always the clear issue of refunds. The 4.6% dividend yield, supported by ongoing buybacks, positions the stock less like a traditional growth bank and more like a yield hybrid.
Risks remain, particularly around global growth and political shocks. But this often affects emotions more than long-term earnings.
The bigger picture is that the market is re-rating HSBC as a high yielding, structurally supported cash flow business.
Bottom line
What stands out to me is that the FTSE 100 is clearly being rescaled. Investors are moving away from long-term growth issues and toward businesses that bring in cash today. Miners and banks are no longer priced solely as cycles – but as cash-generating assets with real return potential.
In that context, I think both Glencore and HSBC should take a close look at current levels, given their ability to generate strong cash flow and return capital on a cyclical basis, even in the face of great uncertainty.
If that change continues, this could be a small short-term trade and a structural rotation. To me, that suggests the FTSE 100 will continue to perform.
