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Talk about surprised! The FTSE 100 broke 6,300 today for the first time since May 2008. A couple of months ago most people were saying that it couldn’t happen. In fact, the doubters would have been cautious enough to say that it wouldn’t breach 6,000 just a month ago. However it did, in fact top 6,000 on 2 January, 2013.
The excitement of the 6,300 mark was not long-lasting as it retreated almost negligibly to 6,294 at the close of the day. Actually the index had climbed as high as 6,311 during the day.
Angus Campbell, Head of Market Analysis at Capital Spreads, said, “The benchmark has now seen off four major figure levels in under a month and is now 6.7 percent higher than where it started the year which has caught even some of the more bullish investors by surprise. Since we’ve seen such considerable strength in equity markets so far this year there’s bound to be some resistance near the highs, but with the 6,300 level now behind us for those bullish investors the only way is up.”
On the other side of the coin, Pricewaterhouse Coopers released a study that may not make FTSE 100 executives quite so happy. PwC conducted a survey involving 40 senior execs from the top 100 on the LSE and discovered that bonus payouts this year may be somewhat slimmer than in the past.
Twenty-one percent of the respondents expect bonuses to be at least 10% lower than last year. Another 17% expect the payouts to be more than 25% lower.
Thirty-eight percent said that they expect that many executive salaries will be frozen whilst any salary increases would be minimal at best. If PwC is correct, 2013 will be the second year in a row in which bonus reductions are the norm. Although Tom Gosling at PwC said, “We expect executive pay to plateau for a period, rather than fall dramatically,” he also noted that it appears that shareholders’ cries for restraint have not fallen entirely on deaf ears. Shareholders in companies with bonus reductions of more than 25% will be ecstatic.
Whether or not the salaries and bonus cuts are adequate remains to be seen as individual companies announce their plans. The discussion in many boardrooms, no doubt, has been, “How much of a haircut to we have to take before the shareholders like what they see?” This write would humbly suggest that the question should remain, “How much do we need to do to once again deserve these bonuses?”
Bits and pieces of the prognosis for the British economy are beginning to indicate some good things, but we really have only begun to put Humpty Dumpty together again. How well we do remains to be seen.
