FTSE 100 strength increases gulf between large and small enterprises

FXOpen

The ever-widening gulf between small enterprise and large corporations is once again in full view as the FTSE 100 index is continuing to flourish.

Investor confidence in the highly diversified index which is represented by Britain's most prestigious 100 publicly listed companies is very high indeed, which is remarkable considering the potential government-imposed restrictions that are lurking in the background over the forthcoming holiday period.

Currently, the FTSE 100 index is trading at 7,302 which is a 0.07% increase over yesterday's already high performance, and represents a 0.056% rise over the course of a month's trading period.

This should be of interest to a number of people with vested interests, and traders and investors would likely be able to correlate the high confidence in this blue-chip index to the current unexpected lack of restrictions to British businesses which have gone alongside the government's continual propagation of medications.

Whilst other non-related stocks within the FTSE 100 such as engineering, mining and manufacturing are all doing well, it's likely that the combination of hospitality, tourism and airline stocks have been instrumental in maintaining the high levels of value currently being displayed by the FTSE 100 index.

The combination of solidly performing engineering and mining stocks in an age during which a move to renewable energy and electric vehicles has driven a need for some of the FTSE 100-listed giants to explore and extract precious metals for battery manufacturing, the big pharma giants such as Moderna and AstraZeneca and the surprise lease of life the hospitality sector and airlines has been given by no lockdowns being imposed have contributed to a stellar performance.

Of course, there is no guarantee that the British government will not go against the will of the public and the business community once again and invoke restrictions before New Year's Day, and if that does happen it is likely that market volatility could be a side effect as investors could take a cautious view on airline and hospitality stocks.

There is a very important matter to consider, however, and that is the viewpoint from within smaller businesses that are not listed on public exchanges.

Whilst the FTSE 100 blue chip giants show massive strength and have so far been able to weather the storm that has been inflicted on them by governments over the past two years, smaller firms are not in such a position and there is more than a degree of discourse relating to what has been regarded by many small businesses as a 'lockdown by stealth' as many people voluntarily began canceling their plans leaving venues, hospitality companies and many customer-facing businesses high and dry with no customers.

Quite a number of leaders of large hospitality businesses have hit out at British Chancellor of the Exchequer Rishi Sunak's offer of a £6,000 grand to cover periods of time during which loss of revenue has taken place due to mass cancelations.

These have been large companies, many of which are listed on the London Stock Exchange and to whom £6,000 is inconsequential, but for smaller privately owned businesses the loss of £6,000 in revenue could be catastrophic.

The mere fact that this is being highlighted by senior executives of large publicly listed companies means that the hospitality business is generally afraid of its future. That in turn means that investors could begin looking closely at the stock prices of the larger listed firms and begin to take a very conservative view on them.

Should this occur, it may have an effect on the overall performance of the FTSE 100 stocks. Tim Rumney, CEO of Best Western Hotels told the Telegraph newspaper this morning: “Rishi’s support is like a dud cracker on Christmas day. It’s just so disappointing and underwhelming in every sense.”

Best Western is a privately held company, but is one of the larger ones in the United Kingdom. To have this type of sentiment being aired in the public domain from a large business such as Best Western demonstrates the anguish.

Listed giants in the pub trade including JD Wetherspoons and Mitchells & Butlers, along with hotels groups Intercontinental and Whitbread are make-or-break stocks at the moment. Should restrictions not be invoked, they may well continue to do well, but they could be large enough to have an impact on London's markets in general if there are restrictions.

IAG, British Airways' owner, lost 9% in value in the lockdowns of 2020, so we have previous history of this dynamic, however easyJet and Ryanair's boards have had enough and made their intentions clear to plough on, but if there are fewer passengers due to choice, it is difficult to see a possible rise in values.

The crossroads is currently being approached, and the next few days will be very interesting for followers of the FTSE 100 index.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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