Investors have spent the last remaining days following and reading several cautionary warnings that the FTSE 100 is heading towards a possible reduction of its position. However, conflicting reports shows that the FTSE 100 is quite abound and plentiful.
The market is even predicted to possibly fall by a possible 60 % should the financial crisis reach its peak. Investors are caught off-guard when the FTSE 100 opened last week 1 % up which broke through its 52-week high of 6878 brush to 6900.
That basically places it within the scratching distance of its all-time high of 6930 set on Millennium Eve which was nearly 15 years ago wherein technology stocks were at its height.
Peace Finally Breaks Out
There was good news despite the political upheaval between the Ukraine and Russia when the respective heads of states came to an agreement of a permanent ceasefire which the reports has still yet to be officially confirmed.
No one is denying the current super-positive U.K. data dubbed as a better-than-expected CIPS/Markit services readings of 65.5 or even China’s official non-manufacturing purchasing managers index (PMI) having hit a 17 month high which rose to 54.4 last August from 54.2 July respectively.
Plenty of things had already happened since then, and this basically isn’t the first time the FTSE 100 has intimidated to scale back its prior peak. In June of 2007, the index levelled at 6732 which unfortunately the credit crunch for the downturn followed shortly after.
As expected, this simply conforms to the anticipated doom-mongers qualms that this bull run has to inevitably end terribly. Moreover, the start of the September-December months constantly reminds the market in general that these months of the year are historically among the worst for stock markets notwithstanding the index climbs.
The ‘Super Mario’ frenzy
Fears over the barely thriving Eurozone could be very well dispelled if the ECB chairman finally unleash its long overdue quantitative easing blitz. All there is to be keen about is for peace and harmony to flourish in The Middle East and the FTSE 100 could find itself moving past the 7500. This is not going to happen any time soon although a permanent ceasefire in Gaza is very much prayed for.
Checking for better yields
The fundamentals are the important thing right now, the FTSE 100 doesn’t appear to be overvalued, trading at 13.79 times earnings. It is up just 2.3 % year-to-date hence it doesn’t look as if it was overbought either.
The average yield of 3.39 % appears to be quite appealing when the best instant access savings account pays only just 1.5 %. Better still, investors can get more than 5 % by investing in the shares of Centrica, GlaxoSmithKline, J Sainsbury and Vodafone. Therefore, there could be more scope for FTSE 100 to finally get fid of its millennium hang-ups and possibly defeat the 7000 benchmark for good measure.
The truth behind the geopolitical tensions is that it has very minimal impact on medium to long-term market performance. The global market was brought to within a close inch of nuclear Armageddon during the height of the Cuban missile crisis during the early 60’s.
To point it forward, an investor in the S&P 500 would have been 7 % in the following month which was up 16 % over the following quarter and up another 34 % a year later.
Perfect time to make purchases
As global markets mark their rise, volatility will likewise rise as well to an estimate of 15 % in August to the previous three months. This should throw up the rate of purchasing opportunities as well. Moreover, investors will also need to be cautious of the threat by the end of the GE and rising interest rates. However, there will always be the increased risks which the FTSE 100 is surprisingly very good at waving off.