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.”

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
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

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    Day In a Page

    Dress the Gaza situation up all you like, but the truth hurts

    Robert Fisk on Gaza conflict

    Dress the situation up all you like, but the truth hurts
    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

    In grandfather's footsteps

    5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
    Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

    Martha Stewart has flying robot

    The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
    Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

    Do women cyclists need 'pootling lanes'?

    Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

    The dining car makes a comeback

    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
    Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

    Gallery rage

    How are institutions tackling the discomfort of overcrowding this summer?
    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

    Eye on the prize

    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
    Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

    Women's rugby

    Tamara Taylor adds fuel to the ire in quest to land World Cup
    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices