Celebrating 70 years of stock returns

The Queen’s Platinum Jubilee celebrations were something. There were a lot of barbecues, parties and toasts to Her Majesty in my part of the country.

But I also watched and read some of the media coverage of national events, which included a good deal of reflection on the enormous economic, social and cultural changes of the past 70 years.

Perhaps rightly so, in this context, more of my viewing was on digital devices than on traditional television, and all of my reading was online, rather than via the quaint old medium of newsprint.

Overcome the ups and downs

Some things haven’t changed. The Queen has remained an enduring figure of resilience through the royal family’s ups and downs, and Britain’s economy has thrived, weathering a number of major crises and recessions.

Likewise, despite some ups and downs, we can also celebrate 70 years of impressive stock returns.

Back to 1952

The UK was a very different place when young Princess Elizabeth was crowned Queen Elizabeth II in 1952.

Winston Churchill was in his second term as Prime Minister; Alan Turing, heroic wartime computer scientist, was found guilty of “gross indecency between men;” Newcastle United won a then-record fifth FA Cup; and, by the end of the year, the Great London Smog blanketed the capital, causing chaos and around 4,000 deaths.

The FTSE100the best-known stock market index in the UK today, didn’t even exist in 1952. FT30 (also called FT Ordinary Share Index) was the index at the time.

British economic barometer

The FT30 was designed by the editor and chief editor of the Financial news in 1935. It was originally known as the Financial News 30-Share Index, until the newspaper merged with the FinancialTimes in 1945.

The index has been designed to track the performance of a selection of companies important to the UK economy. It was an unweighted geometric average of 30 such stocks. Changes to constituents were (and still are) infrequent, usually when taking over a business. And a replacement stock is chosen by the FT editor to maintain the index as a barometer of UK economic performance.

industrial country

In its early days, the FT30 was dominated by heavy industry sectors, such as coal mining, steel and textiles. Names like Bolsover Colliery, Dorman Long and Fine Spinners and Doublers.

Although post-war nationalisations removed some stocks from the index, replacements like shipbuilder Swan Hunter meant the prominence of industrialists had changed little when the Queen took the throne in 1952.

Transition to service industries

Reflecting the significant change in the complexion of the UK economy over the next 70 years, there was a shift in the composition of the FT30 from heavy industry to service sectors.

The financial sector (originally excluded from the index) now includes representatives from banking, insurance and asset management, including Lloyd’s and Legal and general. BT and Vodafone are also members. Other service companies include credit checker Experianmedia group TVIretailer Next and advertising agency WPP.

70 years of stock market returns

There were big falls in the stock markets during the Queen’s reign. The FT30 lost 73% of its value around the 1970s recession. It also suffered major declines caused by the dotcom bust, the financial crisis and the Covid pandemic.

Nevertheless, according to the asset manager SchrödersUK stocks have returned just under 12% a year since 1952, almost double the 6% that savers have earned in cash a year.

Some investors may have enjoyed even better returns. Those who have avoided structurally declining heavy industry sectors in the UK and/or have diversified their portfolios with stocks from higher growth markets, such as the US.

Looking ahead to the next 70 years

The historic long-term wealth-creating power of equity ownership is why our analysts here at The Motley Fool focus on identifying large UK (and US) companies in sectors that have structural drivers. of growth, with a view to buying and holding their shares for many years.

Like the Queen, and most of you reading this column, I won’t be in seven decades. However, I am as confident as can be that current investors, and those of future generations, will reap the rewards of patient, long-term investing in the stock market.

About Nicole Harmon

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