The City of London is staging a remarkable rally this morning, with the FTSE 100 up over 2 per cent at the open. The trigger? A savage sell-off in US Big Tech that has investors scrambling for safer shores. The irony is delicious. For years, we were told the future was in Silicon Valley, in FAANGs and cloud computing. Now, as those highfliers come crashing back to earth, it is stodgy old London that looks like the prudent bet.
The Nasdaq Composite slid 3.5 per cent overnight, its worst single-day drop since 2022. Mega-cap tech names, from Apple to Alphabet, shed tens of billions in market value. The catalyst? A trifecta of terror: rising bond yields, hawkish central bank rhetoric, and disappointing earnings guidance from the usual suspects. When the froth is blown off, what remains is not artificial intelligence or metaverse promises. What remains is the cold, hard reality of discounted cash flows.
And that is where London shines. The UK market is heavily weighted toward value sectors: energy, mining, financials, and consumer staples. These are firms that generate hard cash, not buzzwords. When the global yield curve inverts and recession fears mount, investors rediscover the virtues of dividend yield and price-to-earnings ratios. They flee the speculative and embrace the tangible.
The gilt market is also playing its part. The 10-year yield has eased 8 basis points to 4.12 per cent, a welcome reprieve after weeks of upward pressure. The Bank of England, for all its missteps, is seen as more aggressive on inflation than the Fed. That perception has insulated sterling and given London equities an additional tailwind. Capital is flowing in, not out.
But let us not get carried away. This is a relief rally, not a structural shift. The UK still faces anaemic growth, a sclerotic labour market, and a fiscal outlook that would make even the most committed Keynesian blanch. The Chancellor’s Spring Statement did little to inspire confidence, and the Office for Budget Responsibility’s forecasts remain grim. Yet in the short term, markets are driven by flows, not fundamentals. And today, the flows are pointing east.
For the retail investor, the message is clear: don’t confuse a good trade with a good investment. The rotation into value could run for weeks or even months, but it will not last forever. When the Fed eventually blinks and cuts rates, the tech rally will resume. The question is whether you will be nimble enough to switch back. For now, enjoy the bounce. But keep your stop-losses tight and your cynicism sharper.
In the larger picture, this episode underscores a truth that London has always understood: markets are manic-depressive. The same investors who were euphoric about tech six months ago are now panicked. The same stocks that were overvalued then are now simply overvalued at a lower price. Nothing fundamental has changed, except the mood. And in this business, mood is everything.
So as the screens flash green and the traders on the floor (such as they are) allow themselves a rare smile, remember the golden rule: when everyone rushes to the same exit, the door gets very small. Stay diversified, stay liquid, and stay sceptical.
