Soaring markets give share investors pause

Experts are wary of talking up stocks or funds as fears of an investment correction grow ever stronger.

Global stockmarkets have been hitting highs this week. New York's Dow Jones set a new all-time high. Meanwhile, the FTSE 100 reached its highest level for five years.

Do the rallies mean investors should sell and take profits ahead of an anticipated market correction, or is this the beginning of an stock market boom?

"Investors shouldn't pay too much attention to an index figure," advised Adrian Lowcock of Hargreaves Lansdown. "Instead they should focus on their objectives and the funds they invest in."

He said market prices are based on their relative value to other assets. "Since mid-2012, cash and gilts have looked increasingly unattractive and have made equities look more attractive," he said.

"Generally the market rises in the UK bring us back to the levels seen in 2008, however for equity income investors and those in good actively managed funds they have already reached new highs, so this week's rising index levels shouldn't be of too much concern."

Brian Dennehy of FundExpert, also advises investors not to get too excited about this week's news. In fact, he believes investors have had a dilemma for many months.

"Do you avoid equity markets knowing they are rigged by central bank action? Or do you hold your nose, get involved to some extent and stay close to the exit?" he said.

"If you are in the first category, don't get sucked in now. Be patient," Mr Dennehy advised. "If you are in the latter category, stay very close to the exit.

"Complacency abounds on a range of indicators, flashing just as they did around prior interim peaks over the past decade."

He said the FTSE 100 could well climb higher, possibly to as high as 7000. "But investors must bear in mind that the higher the market goes, the more confident most others will become – whereas in the case of the most successful investors, the higher the market goes, the more cautious they will become," Mr Dennehy said.

Julian Parrott, a partner at Edinburgh-based financial advisers Ethical Futures, told the ethical website Blue & Green Tomorrow that he found the market rally worrying.

"I'm inclined to think that it's false optimism stoked by a great load of cash which is facing near-zero return on deposit and is tempted to take risk to improve return," he said.

"Assets prices are rising on false optimism. I'm pleased to see markets rise but bracing myself for a correction," Mr Parrott said.

Adrian Lowcock agrees that a correction could be in the offing, but not necessarily soon.

"At some point the market will take a breather, but given that so many are expecting a correction it may be a while before it happens. In fact they tend to occur when they are least expected," he said.

"However, investors shouldn't wait for such events as over the longer term they will be better off investing rather than trying to call the markets."

He pointed out that for many people rising share prices will be good for their pensions, boosting their value.

"That could tempt people to think they can cut their contributions but I would caution against that unless they are getting close to their lifetime limit. Even then it would be best to seek professional advice to ensure whatever decision people make is the right one for them in the long-term."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
Arts and Entertainment
Chris Martin of Coldplay performs live for fans at Enmore Theatre on June 19, 2014 in Sydney, Australia. (Photo by Mark Metcalfe/Getty Images)
music
Sport
Dave Mackay lifts the FA Cup in 1967 having skippered Spurs to victory
football
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
Jihadi John
newsMonikers like 'Jihadi John' make the grim sound glamorous
Arts and Entertainment
As depicted in Disney's Robin Hood, King John was cowardly, cruel, avaricious and incompetent
film
Life and Style
Travis Kalanick, the co-founder of Uber, is now worth $5.3bn
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn