Good news! Sort of! The FTSE 100 index of the biggest shares listed in London has reached a new record high.
At 9am this morning it had risen more than 50 points to reach 7,832 – the first time the index had passed the 7,800 mark.
Neil Wilson, chief market analyst at markets.com, said: “The FTSE 100 notched up a fresh record high, rising clear of 7,800 for the first time as the feel-good factor from the trade war truce bolstered risk sentiment and a weaker pound delivered the usual shot of adrenaline for the blue chips.
“It looks like progress on talks between China and the US means we are not about to descend into a punitive trade war.
“Whilst there is still long way to go and nothing is agreed until everything is agreed, there has undoubtedly been solid progress and the sense of relief in equity markets is palpable.”
But should you care?
What does it mean for the rest of the UK
While people report on the FTSE rising and falling as a good or bad thing for Britain – it’s a little more complicated than that.
Because so many firms on the FTSE 100 are based, or make a lot of money, overseas – the value of the pound comes into it too.
A crashing pound means a company that makes money in dollars is worth more in pounds – in the same way you have to pay more (in pounds) to go on holiday in the US.
Equally, a rising pound means that companies who do business in Europe effectively make less money in the UK – much like holidays in Spain get cheaper when the pound rises.
So, as well as how much the companies are worth, how much the pound is worth overseas matters too.
The FTSE 250 – by contrast – contains far more companies that are based and operate in Britain (such as Greggs, Wetherspoons and Dixons), so is seen by many as a better way to work out how well the UK is doing.
Does any of this matter?
The stock market is not the economy. Prices rise and fall all the time. Like living in a house, what matters in real terms isn’t the price today, it’s the one when you sell it.
But, much like house prices, a rising market makes people feel confident and more likely to spend cash, while a falling one makes them more nervous.
However, there are also certain real-world impacts to rising and falling prices, even for those without any money in the markets.
The two biggest are in jobs and pensions.
Impact on jobs
When shares rise, companies are seen as successful – or at least secure – and are more likely to create jobs, offer pay rises and expand generally.
When stock markets collapse, companies feel under threat – that means they are less likely to raise wages and more likely to cut jobs than create them.
Of course, a single day’s drop or rise isn’t going to make a big difference in this, but extended falls or increases can.
Impact on pensions
Your private or work pension is almost certainly invested in the markets – unless you’re a civil servant.
That means a rising market can mean more money when it comes time to cash in your savings for something to live off.
But there’s a second impact too.
If you have a final salary pension, or similar, companies are required to make sure there’s enough money to fund that.
While markets rise, that’s pretty straightforward. When they collapse, that means diverting more and more money that could have gone on staff wages, or new jobs, that has to be ploughed into the pension funds.
The cost of these pensions was a large part of the collapse of BHS – with the company seeing a £517million gap between its commitments and the money it had to meet them.
A rising market lets these firms breathe a little easier.
All this means that, whether you have one or not, any company that has in the past offered final salary pensions is at the mercy of the markets to some extent.
And that means your job there could be put at risk if they need to find cash to fund the pensions of the people who have already left.
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