22-May-2013 10:02

Time to Exit the Stock Markets?

The stock markets & shares are hitting fresh highs & lots of private investor money is moving daily into equity based funds.

With much of the media talking-up world markets is this new money simply following the ‘herd mentality’, or will it (again) be a case of ‘what goes up must come down’ & a lot of people will sadly get rather burnt on the way down?

The topic has been discussed ad nauseam in most of the papers and few (especially the so-called ‘experts’) have any real idea on future market trends.

However, with the amazing rises we are seeing, and without any real fundamentals pushing markets and valuations higher, is it time for ‘small investors, to take profits and exit the market, to evaluate & adjust their portfolios for safety and apply strict stop-losses, to pile in again with more cash or just take a long-term view, lie back and watch what happens?

Hmmm… I wish I knew the answers!

> Return to Blogs List    

Contributed by Peter Herd - Managing Director at Essential IFA Lt on 22-May-2013 13:14
Alan Rae, very well put and would have to agree with that view point. As some people who know me from my comments - I have been recommending equities for about 2 years when the market was much lower then it is now.

I do think that there will be further growth but and this is an important but it will be very important to review and take profit at some point as my comment above state.
Contributed by Alan Rae - Founder and Managing Partner at Howtodo on 22-May-2013 11:15
I think part of the difficulty that the uninitiated have is we have this notion that the stock market is a leading indicator of the economy.
While this was true when I was a market analyst back in the Jurassic, nowadays most of the FTSE 100 activity represents business activity carried on overseas - and some foreign owned companies (such as Vedanta for instance) find it expedient to list in London.
From a certain perspective it's footloose capital that's at the root of much of the decay in UK PLC. Home grown capitalists have invested overseas rather than in the UK since WW2 while every time British Company gets flogged off to a multinational, HMRC takes a major hit due to the Googleisation of the tax take.
Of course you won't find that in the Daily Wail
Contributed by Peter Herd - Managing Director at Essential IFA Lt on 22-May-2013 11:14
A very good question and it very much depends on your own personal attitude to risk and long-term views.

If I take a general view I believe that the stock market has a little way to go before it runs out of steam and I suspect that the UK FTSE 100 will probably reach 7200 points in the next 8 to 12 month.
There are a number of factors behind this growth e.g. low interest rates, quantitative easing and a property market that is poorly performing.

Even if you look further afield like Japan we are starting to see massive rises in stock market performance as confidence returns to the market and government stimulus packages have the desired effect on markets.

We also still have a reasonable amount of inflation in the system even at 2.5% this is still above the 2% target rate for the Bank of England. If the job market starts to improve we could also see further rises in inflation as incomes at some point will have to start to rise to catch up with cost of living and as in the past stock market has always been a good tracker of inflation

This growth has probably another 8 to 12 months to go before it runs out of steam particularly as the media talk the market up.

A cautionary note I firmly believe that well balanced portfolio using a number of different asset classes and also taking profit at appropriate times this includes rebalancing the portfolio on a regular basis.

Part of the reasons why we seeing such growth in stock market is the bond market is overpriced and we will probably see further deterioration in the bond market over the next 12 months which normally results in further growth in the stock market.

The comments above are a personal opinion do not constitute advice, I would always recommend anybody sits down with their independent financial advisor before making alterations to their this portfolio. The value of fund can go down as well as up.
Contributed by Norman Feiner on 22-May-2013 10:14
Agree that with many company dividends reaching 5%+ and cash on interest earning about 1.5% it seems a no-brainer.
But, if markets drop, there may be carnage for the amateur investors...
Contributed by Alan Rae - Chairman at Fletching Glasshouses and F on 22-May-2013 10:11
You just have to keep an eagle eye on it. The truth is there's a lot of (qe) cash sloshing about and nowhere much for it to go
Select the country you want to call:
Call us Freefone 0800 619 2626
Earn £££s Become an Agent
Recommend a Friend