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

News
i100
News
Bobbi Kristina Brown, daughter of the late singer Whitney Houston, poses at the premiere of
people
News
people
News
The frequency with which we lie and our ability to get away with it both increase to young adulthood then decline with age, possibly because of changes that occur in the brain
scienceRoger Dobson knows the true story, from Pinocchio to Pollard
Voices
The male menopause: those affected can suffer hot flushes, night sweats, joint pain, low libido, depression and an increase in body fat, among other symptoms
voicesSo the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Life and Style
health
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: DBA Developer - SQL Server

    £30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Customer Service Administrator

    £13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

    Recruitment Genius: Dialler Administrator

    £22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

    Ashdown Group: Contracts Manager - City of London

    £35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen