FTSE 100

For the FTSE 100 to reach 10,000 points it would need to rise by 3,324 points (or just shy of 50%) from its current level of 6,676. With its highest ever level being 7,100 points, the 10,000 points level may seem to be a very, very long way off. After all, the FTSE 100 is still trading at a lower level than it was when the Champagne corks popped for the start of a new Millennium.

However, the performance of the FTSE 100 since then has been dampened by two huge events: the bursting of the dot.com bubble and the credit crunch. Both caused the index to fall by more than 45% and destroyed confidence among investors regarding the outlook for the UK’s main share index. And, while the property market has had a superb fifteen year period (albeit with a relatively small pullback during the credit crunch), the FTSE 100 has proved to be somewhat disappointing in terms of its capital growth.

However, when the FTSE 100 performs well, it really performs well. For example, it came into existence in January 1984 and by March 1987 it had already doubled in value from 1,000 to 2,000 points. A further doubling took place by October 1996 and, by the end of 1999, the FTSE 100 had risen by a whopping 6.9 times since January 1984. That works out as an annualised growth rate of 12.86%, which is clearly a staggering rate of growth and easily beats the performance of any other major asset class during the same time period.

Looking ahead, if the FTSE 100 were to produce the same level of return in future, then it would reach the 10,000 points level in three years and four months’ time (i.e. December 2018). That may sound like a very optimistic assertion, given that the index has disappointed since the end of 1999 but, with the outlook for the global economy being upbeat and the UK economy moving from strength to strength, such performance would not be a shock to most investors.

Of course, if the FTSE 100 were to perform as it has done from 1984 until the present day then it would take much longer to reach 10,000 points. In fact, with an annualised capital return of 6.2% since the start of 1984, it would take around six years and nine months for the index to reach 10,000 points. In other words, by May 2022 it would have risen by the required 50%.

Clearly, there is a major difference between the two dates, but they both serve to show that even if the FTSE 100 simply does what it has done since it was created, returns from the stock market could be superb.

For many younger investors, they may not have experienced first-hand a trebling of the FTSE 100 in their lifetimes. But for those who have in the 1980s and 1990s, it is clear that the FTSE 100 gaining 50% to reach 10,000 points is not a big ask and, realistically, it could easily be achieved within a handful of years.