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 to the 70 years since the late Queen Elizabeth II’s investiture.
An indication of where investors’ hearts lay in 1953 comes from the Financial Times’ coronation issue. Lex then wondered if bonds — which we define as interwar gilts and perpetual consols — looked attractive relative to purchasing power over a century.
In some ways, not much has changed. Bonds were yielding just over 4% then, not much more than the oldest gilts today. In 1952, price inflation was running at a rate of about 10%, but would slow to 3% by the end of 1953, as it is today.
There was no mention in Lex of the actions. Discussion of the stocks themselves languished in a different section, just before the classifieds and price data. The cult of fairness that began in the mid-1950s in the UK had yet to begin. Equity returns since the 1953 coronation have beaten government securities and cash, both before and after inflation.
According to Mike Staunton of the London Business School, stock dividend yields were around 5%. Today, they are just over 4%.
If you were expecting a foreign-sounding group of 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 is uncertain whether these three pillars will still top the stock charts the next time a British monarch is crowned. Climate change and declining smoking could wipe out their main sources of income. The first issue is the most important: unless business models change radically, the carbon transition could hurt the prospects of the 23% of the FTSE 100, which is represented by commodities companies.
Shell, BP and BAT may still rank high, but they have already fallen when measured as a percentage of FTSE 100 capitalization over the past two decades. BP more than halved to 4.3% and BAT’s importance plummeted by more than three-quarters to 0.3%.
Most UK investors would be waving a flag for a remunerative markets transition under the environmentally conscious Charles. They would like to see a few big tech and renewable energy companies in the indices by the next coronation.
Which companies could lead the FTSE 100 decades from now? The Lex team wants to know more about readers. Please let us know what you think in the comments section below.
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