Investors remain cautious despite FTSE surge

Investors remain cautious despite FTSE surge

Investors are cautious about the future despite the FTSE 100 breaking its all-time high, research has suggested.

The Association of Investment Companies has looked into investor confidence following the FTSE 100 overtaking its 1999 high of 6930.2 on Tuesday.

Despite this good news, investors are still worried about a crisis in the eurozone, a stock market correction and the upcoming general election.

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According to Annabel Brodie-Smith, communications director at the AIC, the number of investors preparing to invest in the stock market over the next few months is 7 percentage points down on the same period last year

She said: “Markets have climbed a wall of worry so far this year, with investors clearly choosing to be ‘risk on’ in the context of historically low interest rates.

“While half of investors are still planning to increase their stock market exposure over the next few months, this is 7 percentage points down on last year.”

Meanwhile, the State Street Investor Confidence Index fell by 1.4 points during February.

Despite these concerns, other commentators believed there was more upside to the market. Elroy Dimson, emeritus professor of finance at London Business School, said there was a 50/50 chance of the FTSE 100 hitting 10,000 by 2022 but added it wouldn’t be a “smooth ride”.

Adrian Lowcock, head of investing at Axa Wealth, said that despite concerns about oil and the US, investors were still more confident than they have been in the past.

He said: “It is difficult to predict where the market will be by the end of 2015 let alone beyond that, but we could expect to see multiple new record highs this year.”

He urged investors to remain focused on valuation and not get carried away.

Adviser view

Guy Foster, head of research at Brewin Dolphin, said: “It is unsurprising to see equities rising while investors’ concerns remain. This illustrates the age-old tendency of markets to climb a wall of worry.

“We’re already seeing smaller companies rebound after investors lost confidence and allowed valuations, relative to large caps, to drift to medium-term lows.

“Ultimately, the most rational fears for investors have historically been interest-rate rises to combat inflation.”