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The FTSE-100 has hit a second all-time closing high in as many days. The index of the UK’s biggest 100 listed companies, having earlier hit a new intra-day high of 8,075.52 at just after 8.24am, finished the session up 20.94 points, around 0.26%, at 8044.81.

It’s worth noting, though, the Footsie has been a relative laggard this year. The S&P 500, America’s top stock index, is up 6.91% so far in 2024, Japan’s Nikkei 225 is up 12.81% and Germany’s DAX 40 is up by 8.30%.

The Footsie, by contrast, is up by a mere 4.05% even after the rally of recent sessions. So it can hardly be said to be doing well compared to international peers. On top of those already mentioned, the MIB in Italy is up by 13.24% this year and the CAC 40 in France by 7.46%, for example.

Nevertheless, the Footsie hitting a new record close two days running is notable.

There is no shortage of reasons why.

The most obvious is the recent weakness in sterling. The pound hit a five-month low against an international basket of currencies on Monday following comments from Sir Dave Ramsden, a deputy governor of the Bank of England, on Friday afternoon in which he pointed to the growing likelihood of interest rate cuts in the near future

That has weakened the pound against the US dollar in particular.

Since three-quarters of earnings of FTSE-100 companies are denominated in other currencies, chiefly the US dollar, a fall in the pound against those currencies makes the future earnings generated by Footsie companies – whose shares are denominated in sterling – cheaper to buy in those currencies.

That was certainly behind the big rally seen on Monday – although today sterling rallied on comments from Huw Pill, the Bank’s chief economist, which suggests there is more going on. That something is the relative cheapness of the Footsie in comparison with its peers.

The Footsie currently trades on a price/earnings (P/E) ratio of just 13.22 times – in other words, £1 invested in the index today would be repaid 13.22 years from now.

That is cheap when set against the DAX in Germany, which trades on a P/E of 14.87 times and the CAC in France, which trades on a P/E of 15.91 times or the SMI in Switzerland, which is on 14.52 times.

The main US indices, meanwhile, cavort along on P/E ratios of more than 20 times. Only Spain’s leading stock index, the IBEX, looks cheaper than the Footsie by comparison.

The conclusion that should emphatically not be drawn is that the Footsie’s recent rally is anything to do with the UK’s economic outlook, even though the latter is visibly improving.

The index is chock-full of companies that have little or nothing to do with the UK – such as Fresnillo, a Mexican gold and silver miner; Antofagasta, a Chilean copper and gold miner; and Ashtead Group, a plant and tool hire company which derives £90 in every £100 it earns from the US.

Even companies thought of as British, such as BP, Rolls-Royce, BAE Systems, Shell and Diageo, the world’s biggest scotch whiskey and tequila producer, derive the vast majority of their earnings outside the UK. In fact, of the 20 biggest companies in the Footsie, only one – the Lloyds Banking Group – can be said to make most of its income in the UK.

For a better gauge of how corporate Britain is doing, investors are better off looking at the FTSE 250, the next biggest 250 listed companies on the London Stock Exchange and home to household names such as Bellway, Games Workshop and ITV.

Some of these also derive a fair chunk of earnings from outside the UK, such as the cruise operator Carnival, the ingredients producer Tate & Lyle and the catalytic converters group Johnson Matthey.

But it is also replete with companies that make most or all of their earnings in the UK, such as the property trio British Land, LondonMetric Property and Derwent London, the housebuilder Bellway and everyone’s favorite sausage roll emporium Greggs.

In short, the FTSE 250 is a much better guide to sentiment towards UK companies than the FTSE-100. The bad news is that it is only up by a paltry 0.6% this year so far.