Investors are being warned to be cautious about the FTSEs all-time high this week.
The FTSE 100 closed yesterday (15 May) at 7,454, an all-time closing high, but Richard Stone, chief executive at The Share Centre, said the real question was “whether the market can hold these levels, or even continue its upward trajectory”.
“The simple answer is no-one really knows,” he added.
The FTSE 100’s performance has been helped by a weakness in sterling, which has supported earnings and dividend growth for companies who earn the bulk of their profits outside the UK.
Many FTSE 100 firms have global footprints, and are being helped in this way.
Despite the possible volatility that could come on the back of the general election, investor sentiment has been strong.
”Things may be getting tougher for the UK economy this year as rising inflation and weak wage growth look set to dent consumer demand, but the Footsie dances to a different tune because so many of the companies within it are global businesses,” said Laith Khalaf at Hargreaves Lansdown.
“The UK stock market hasn’t been phased by the general election, and continues to perform strongly against a backdrop of low interest rates and an improving global economy.”
However, Mr Stone, at The Share Centre, warned that there were negative issues that could weigh on the stock market going forward.
“There are concerns about rising inflation particularly relative to earnings. This not only squeezes the consumer’s ability to spend which may dampen UK economic performance, but falling real incomes also limits the ability to find ‘spare’ disposable income to save and invest making it harder for personal investors to save more.
"There is also a continuing risk from geo-political events such as tension with North Korea,” he said.
He warned personal investors to keep an eye on their portfolios and ensure that they are balanced and robust.
“The level of uncertainty around the world, politically and economically, undoubtedly makes it a higher risk environment for personal investors at present and they should look to make balanced portfolio investment decisions in that context and where appropriate use stop loss limits to try and lock in gains in their positions in specific equities.”
rosie.murray-west@ft.com
