Over the past decade, global capital markets have experienced one of the most volatile periods in their entire history. For example, since the millennium, the index of Britain’s highest valued companies, the FT-SE 100 (Footsie) has often moved up and down by more than 100 points in a single day, driven by the extreme price fluctuation of risky internet or technology shares, the changing value of blue-chip companies, a global banking and Euro financial crisis, rising oil and commodity prices, all underpinned by increasing geo-political instability.
Leading up to the millennium during the dot.com boom, many I.T. firms never turned a profit, let alone a dividend. Yet, even without yield, cover, or P/E ratios to compare one company with another and its peer group, their share prices soared, fuelled by speculation. Many traditional companies suffered from this tyranny of fashion. Despite creditable financial performance, their values plummeted as investors moved sectors. In March 2000 a radical shakeout of the FT-SE 100 occurred.