The unity*dc blog

Category: Economy

Could the FTSE be near the bottom?

Wed, 25th Feb 2009

I went to a presentation by Shirlaws, the coaching company, in London the other day. At the presentation, they put forward a number of ideas, but the one that got me thinking was this one.

To date for every recession since they've measured these things, the FTSE 100 has always dropped and then climbed again as the recovery begins. That's a no brainer, but there's an interesting pattern: the figure at which the FTSE 100 hits rock bottom is always slightly higher than it was at the bottom of the previous recession. How much higher varies, but crucially it has never been lower.

Now if this model is true for this recession, we know that the FTSE will bottom out somewhere slightly above the 3567 figure. Given that the FTSE's high in the latest cycle was 6721 (in October 2007), and last night it was 3816, that means we're at least 92% of the way towards bottoming out.

Now it's only a basic model, but to me 92% done sounds an awful lot better than the gloom, doom and talk of market free-fall that I read & watch in the media.

Update: 2nd March
Now the FTSE's hit 3625, might that now mean we're 98% of the way there?

Update: 3rd March
Hmmm... With the FTSE now at 3512 that could be this theory gone, or perhaps this IS the bottom?