In monarchies, eras are defined by the reign of a king or queen. Saturday’s coronation of King Charles III has Lex wondering what awaits British investors and how different it might be from the 70 years since the investiture of the late Queen Elizabeth II.
One indication of where investor hearts lay in 1953 comes from the coronation issue of the Financial Times. Lex then reflected on whether the bonds – which we have defined as gilts and the perpetual consulates between the two wars -looked attractive relative to purchasing power for over a century.
In some respects, not much has changed. Bonds then returned just over 4 percent, not much more than longer-dated gilts today. Price inflation stood at a rate of about 10 percent in 1952, but would slow to 3 percent by the end of 1953, similar to today.
There was no mention in the Lex of actions. Discussion of the stocks themselves languished in a different section, just before the economic announcements and price data. The cult of fairness that began in the mid-1950s in the UK had not yet begun. Equity returns since the 1953 coronation have beaten gilts and cash, both before and after inflation.
According to London Business School’s Mike Staunton, stock dividend yields were around 5%. Today they are just over 4 percent.
If you were expecting a group that sounds alien to the top 10 companies by market valuation, you’d be surprised. Shell, BP (Anglo-Iranian Oil) and British American Tobacco were on the list, as they are today.
It’s hardly a given that those three stalwarts will still top the stock chart the next time a British monarch is crowned. Climate change and a decline in smoking could wipe out their main sources of income. The first problem is more general: unless business models change dramatically, the carbon transition could hurt the prospects of the 23% of the FTSE 100, represented by commodity companies.
Shell, BP and BAT may still rank high, but they have already shrunk when measured as a percentage of the FTSE 100 market cap over the past two decades. BP more than halved to 4.3% and BAT’s weight dropped by more than three quarters to 0.3%.
Most British investors would wave a flag for a profitable transition of markets under the environmentally conscious Charles. They would like to see some big tech and renewable companies in the indexes by the next coronation.
Which companies could lead the FTSE 100 decades from now? Lex’s team is interested in hearing more from readers. Please tell us what you think in the comments section below
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