New analysis from investment manager Schroders has shed light on the factors underpinning the FTSE 100's performance throughout 2017, presenting a detailed breakdown through five key charts. The report indicates that the UK's blue-chip index delivered a positive return, buoyed by robust earnings growth and substantial dividend distributions from its constituent companies.
A significant factor contributing to the FTSE 100's upward trajectory was the prevailing strength in global economic growth. This broader international context provided a favourable environment for many of the UK's largest companies, which often derive a substantial portion of their revenues from overseas operations. Furthermore, the depreciation of the British pound following the 2016 Brexit referendum continued to benefit these internationally focused firms, as their foreign earnings translated into higher sterling values.
Sector-specific performance played a crucial role, with the energy and mining sectors emerging as particularly strong contributors to earnings improvements. These sectors benefited from rising commodity prices during the period. Financial companies also showed notable recovery and growth, further bolstering the overall index. The report underscores that these sectors collectively had a significant impact on the FTSE 100's positive movement.
Dividend growth was identified as a standout feature of 2017. Schroders' analysis suggested that the year was on track to achieve a record level of dividend payouts from FTSE 100 companies. This trend is often seen as a sign of corporate health and can be particularly attractive to income-seeking investors, including pension funds and individual savers.
Understanding the dynamics of the FTSE 100 is crucial for assessing the health of the UK's corporate sector and broader economy. The index comprises the 100 largest companies listed on the London Stock Exchange by market capitalisation, making its performance a key indicator of investor sentiment and corporate profitability. The analysis provides valuable historical context for investors, explaining the underlying drivers behind the market's movements in that specific year.