The FTSE 100 closed at a record high level of 7556.24 on yesterday (12 October) on the back of sterling weakness.
The previous record high level was 7547.63 on 26 May 2017.
The rise in the blue-chip index happened as sterling fell by as much as one per cent during the day following comments from Michel Barnier, the EU’s chief negotiator, who said the negotiations around the UK’s exit from the EU had reached a stalemate.
Mr Barnier said the talks were not yet able to move to the next stage in which trade deals will be addressed.
The FTSE 100 tends to move in the opposite direction to sterling because around 70 per cent of the earnings of the companies in the market are from overseas, so a weaker pound boosts the value of those earnings.
Laith Khalaf, senior analyst at Hargreaves Lansdown, warned investors against jumping on the bandwagon of a FTSE rising under these conditions.
“The UK stock market continues its winning streak despite concerns over economic performance and the unfolding Brexit process. The question is whether the market’s strong run means it’s fit to burst.
"To that end, it’s vital to recognise that the level of the Footsie is not a measure of the value in UK stocks, seeing as it doesn’t take account of the level of earnings of companies in the index.
"Basing investment decisions on the level of the FTSE is therefore like deciding whether to buy something based on its price, without actually knowing what the item is.”
Mr Khalaf said the global economy looks to be in good shape, and when company earnings are taken into account, the market’s valuation is “reasonable”, rather than expensive or cheap.
Bruce Bulgin, partner in the IFA firm of Chadney Bulgin in Fleet , Hampshire, said the UK market accounts for only about 6 per cent of the global index so he prefers to put his clients capital into global funds.
David.Thorpe@ft.com
