Pessimists ready to have their day

Are we in the dying days of a bull market? It certainly feels as if we are, as we enter the dog days of August, and torpor overhangs the market.

On Friday, following in Wall Street's footsteps, leading shares lost 1.5 per cent, or 76.9 points off the FT-SE 100 index, which closed at 4901.1. Although another substantial fall, optimists would point to the fact that the market eventually ended ahead of where it started the week, after the even more precipitous declines of the previous Friday.

Yet is it just Wall Street that should be exercising our minds? For the determined gloomster, there is plenty of evidence accumulating that things are not well. How else should we read the news that British consumer spending has reached its highest level in nine years. In the second quarter, consumer spending rose by 1.5 per cent - the fastest rate since the last boom of the mid-to-late 1980s.

This is, by any stretch, bad news for the medium term. Once again the economy seems poised to undergo the classic British phenomenon, boom to bust in three easy stages: consumers go spending-crazy as more money comes into their pockets, interest rates rise, and suddenly businesses and individuals find they cannot afford their loans. At least on this occasion, the politicians can say, up to a point, that they are not to blame. This time round, the money comes to a great extent from the conversion windfalls.

Even so, this is little consolation to the perennial gloomsters among us. A rosy period of expansion will prove unsustainable, blighted by rising interest rates and, in this instance, a strong pound. As one economist once put it, never underestimate the capacity of the British economy to disappoint.

Coming back to the market, it seems clear that consumer spending - and some other uninspiring economic data - is the real bogey for the stock market. It would be hard to imagine a clearer sell signal.

Last week witnessed some of the more determined share buying by company directors, as the board of Ulster TV piled into their stock. The reason is that the company is on the receiving end of a hostile bid from Scottish Media, owner of Scottish Television, and the Herald newspaper.

Between them, the directors bought 4.36 million shares at 210p - roughly 8.3 per cent of the company. No one could accuse them of failing to put their money where their mouths are - which must at least be some consolation to investors in the group. The bulk of them were bought by John McGuckian, a Northern Ireland businessman who is Ulster's chairman, who added 4 million shares to his holding.

It is good to recall a recommendation from this column of a little over a year ago, in April 1996, when we said shares in Rentokil were a sell. The group, since renamed Rentokil Initial after it won its bid for services conglomerate BET, would find it hard to sustain the record of 20 per cent annual growth. Immodest to crow it may be, but from December of last year, the shares have gone nowhere - while the rest of the market has soared. It is perhaps still too soon to say for sure if the glory days are over, but there are too many doubts to suggest the shares are the buy they were five years ago.

On a potentially more profitable note, Sherwood International, a software supplier to the life insurance, pensions and reinsurance sectors, looks to be making some useful progress. Its AMARTA software has had its first sale in the US, to Northwestern Mutual Life, with two further sales notched up in South Africa. This may sound like small beer, but the US market is enormous, and the sale came through a prestigious computer consultant, which only sells to the top 200 institutions.

The group's record over the past eight years is patchy, but in the last two years, the dividend has grown 87 per cent and 20 per cent, with a further 20 per cent hike at the halfway stage just gone. Margins are also improving, and there is good reason to suppose there is further upside to come.

By the end of the year, it would be fair to expect the operating margin to have reached 8.6 per cent, from 6.6 per cent at the time of the interims. The shares, however, trade on the very reasonable level of 15.6 times current year earnings, and 12.7 times 1998 earnings.

RICHARD PHILLIPS

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
scotland decidesIs a huge gamble on Scotland's oil keeping the First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
News
news

PROMOTED VIDEO
Sport
footballThe latest scores and Twitter updates from tonight’s games, featuring Bayern Munich vs Man City and Chelsea vs Schalke
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
News
i100
News
news

Watch this commuter wage a one-man war against the Circle Line
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes the hobby look 'dysfunctional', they say
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

Arts and Entertainment
Maxine Peake plays Hamlet at Manchester's Royal Exchange
theatreReview: Maxine Peake brings emotional ferocity to Shakespeare's starring part
Arts and Entertainment
Jack Huston is the new Ben-Hur
film

It scooped up an unprecedented 11 Academy Awards when it was first remade in 1959

Extras
10 best table lamps
indybest
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.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Recruitment Consultant - Soho - IT, Pharma, Public Sector

£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week