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; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
PROMOTED VIDEO
Life and Style
Passing on: George Washington died alert, aware and in his own bed. This is the kind of of death most people would like to have
health
Life and Style
fashion

News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleFormer Newsnight presenter is being touted for a brand new role
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tv
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Brendan Rodgers as a manager, writes Paul Scholes
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
Arts and Entertainment
Stik on the crane as he completed the mural
art
Arts and Entertainment
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
Life and Style
Dishing it out: the head chef in ‘Ratatouille’
food + drinkShould UK restaurants follow suit?
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

    Argyll Scott International: Service Desk Analyst

    £20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

    Argyll Scott International: 2x Service Desk Analyst

    £20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

    Recruitment Genius: Senior Execution Trader

    £30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

    Citifocus Ltd: ACA - Financial Reporting

    £Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

    Day In a Page

    Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

    Christmas Appeal

    Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
    Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

    Is it always right to try to prolong life?

    Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

    What does it take for women to get to the top?

    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
    Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

    Knitting pretty: British Christmas Jumpers

    Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
    French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

    French chefs campaign against bullying

    A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
    Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

    Just what you need on a New Year hangover...

    Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
    Cuba set to stage its first US musical in 50 years

    Cuba to stage first US musical in 50 years

    Claire Allfree finds out if the new production of Rent will hit the right note in Havana
    Christmas 2014: 10 best educational toys

    Learn and play: 10 best educational toys

    Of course you want them to have fun, but even better if they can learn at the same time
    Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

    Paul Scholes column

    I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
    Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

    Lewis Moody: Lancaster has made all the right calls – now England must deliver

    So what must the red-rose do differently? They have to take the points on offer 
    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game