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Elon Musk has claimed that the current iterations of artificial intelligence (AI) will surpass humans in general intellect by the end of 2025. Seven full months before these little chat models act like human know-it-alls? I’m sceptical.
But Large Language Models (LLMs) are nonetheless still fun to play around with, often quicker at finding a piece of info than Google Search, and occasionally offer some fascinating nuggets of truth. With that in mind, I set about asking ChatGPT about the prospects of the UK’s premier index, the FTSE 100.
The question
When will the FTSE 100 reach 10,000?
The answer came in three parts with varying degrees of optimism.
1. Optimistic Case (2-3 years): Result: FTSE 100 reaches 10,000 by 2027-28.
2. Moderate Case (5+ years): Result: FTSE 100 hits 10,000 by 2030 or later.
3. Bearish Case (not this decade): Result: FTSE 100 struggles to reach 10,000 even by 2035.
The last line makes for some grim reading. The prospect of Britain’s premier index still languishing in the 9,000s a decade from now won’t be making too many investors happy, nor anyone with a stake in the economy doing well either.
On the other hand, hitting the five-digit mark by 2027 sounds like a rosy turn of events – that’s a 19% jump over the next two years.
Sounds like we need a little more context.
Hey ChatGPT, want to jump in?
The FTSE 100 “has been historically slower-growing than US indices (like the S&P 500) due to its heavy weighting in energy, financials, and consumer staples, and lower exposure to tech”.
Here are some truisms on the state of the index. A lesser-known fact about the UK and US markets is that they are much more similar than they first appear – it’s really big tech firms that make such a marked difference in things like performance and valuation.
There wasn’t much else of interest in the response, so it doesn’t sound like I’m going to get anything too revelatory out of my bot pal today.
What ChatGPT missed
What struck me most about ChatGPT’s insights was more what it missed, that being dividends. The fact that the FTSE 100 boasts the highest average dividend among any of the developed markets is something that shouldn’t be ignored. That’s because dividend payments don’t enter into the change in price level.
Even if the FTSE 100 does stay level for another 100 years, investors would still be scooping up yearly dividends all the while.
Tesco (LSE: TSCO) shares illustrate this nicely. The supermarket is a £24bn giant selling those “consumer staples” ChatGPT mentioned we find a lot of on the FTSE 100. Growth’s modest at this point. No one expects Tesco to grow 10-fold and make a huge bump towards that 10,000 figure. There are those who might want to look for other companies with a less saturated market.
But a 3.47% dividend drawn from stable revenues can be very attractive for those who want a consistent passive income from an investment. Its strong branding, sticky Clubcard bonuses and focus on customer experience make this my favourite stock in a cut-throat sector.
I own shares in the big shop myself and I’d say this is one for investors to consider.
