To sell or not to sell? That is the question
The Footsie is poised to hit the 7,000 mark but experts are divided on whether it is time to cash in
With the Footsie climbing to a 14-year high last month and closing within touching distance of the figure last night, City speculation is rising that the popular stock market index could finally be about to climb above the psychological 7,000 figure.
That could be evidence that the bubbling market rally really will be sustained. But it could also prove to be the tipping point which prompts further sell-offs from investors.
While some experts suggest now is the time to be fully-invested in the market, others warn of being too exposed to the risk of a major correction.
Darius McDermott of Chelsea Financial Services remains wary. “In the short term, I believe any sustained market rally needs to be driven by the mega caps, the top 20 of the FTSE 100,” he says. “There is little evidence yet that this will happen, apart from a slight pick-up in M&A.
“If we are to finally break the 7,000 barrier, earnings need to come through, and the big companies need to lead the way. Any disappointing earnings will be punished.”
He believes the Footsie will remain a little short of 7,000 for a while longer. “But I do think we will break 7,000 – and stay there – eventually. It’s not exactly a raging bull market, but it’s going in the right direction.”
Other experts are more bullish. “The current bull market will continue and I am optimistic that the FTSE 100 will breach 7,000 before the end of this year,” says Stephen Bailey, co-manager of Liontrust Macro Equity Income Fund.
“Equity valuations are generally still attractive, as shown by the yield on the FTSE All-Share index topping 3.3 per cent. In contrast, savers in cash accounts are receiving a negative return once inflation is taken into account.”
However, he warned that some parts of the UK market may be held back by, or suffer from, bouts of political risk ahead of next year’s general election.
Julian Chillingworth of Rathbones is equally positive above prospects. “The FTSE 100 will break through the 7,000 barrier. The market has clearly entered a new phase, encouraging investors to recycle money out of the high-growth, high-valuation stocks into cheaper areas that have lagged the bull market,” he says.
“But as the economy improves, the missing jigsaw piece is earnings growth. Recent data suggest this is about to improve in the US. If this relationship holds in the UK, we should start to see meaningful earnings upgrades and the market push through.”
Richard Buxton of Old Mutual believes it may take a little longer for the Footsie to pass 7,000. “Whether we breach this huge milestone in 2014 or 2015 rests largely on how long it takes for this economic growth to feed through into positive profits surprise and earnings upgrades,” he says. “Until then, stand by for more months of busily going nowhere.”
Confused about whether to back the market, or flee from it? It’s ever been thus. Max King, portfolio manager at Investec, points out that many investors were caught out by the dramatic drop in stock markets that followed the collapse in the technology- led boom in early 2000 and abandoned equities.
Equally, others abandoned stock markets when they crashed during the 2008 financial crisis. “So investors will now be wondering whether a new high means that it is safe to go back in or whether it marks the latest peak of a roller-coaster ride,” Mr King says.
His conclusion? “The valuation of the FTSE 100 is lower now than in 1999 but the quality is probably higher,” he says.
“The steady growth in the UK and the global economy is likely to continue for a few years and there is every reason to expect that to be converted into higher corporate earnings and dividends.”
Scottish Power hit with sales ban by regulator
Which? calls for caps on high pension product fees
Weekly Money: round-up of the personal finance stories you may have missed 2 to 6 March
There are 'dark corners' of the investment and pensions industry, says Pension Minister
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 What happens to your body when you give up sugar?
- 2 Tourist films plane's descent just metres above packed Caribbean beach
- 3 World Book Day: Boy 'excluded' from school after dressing up as Fifty Shades' Christian Grey
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 GamerGate: developer Tim Schafer provokes rage with joke about online gaming activists at industry awards
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
End of the licence fee: BBC to back radical overhaul of how it is funded
Elif Shafak: Turkish author warns against rise of British nationalism
Ex-head of MI6: 'We shouldn't kid ourselves that Russia is on a path to democracy'
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
iJobs Money & Business
£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
Day In a Page
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads