The U.K.’s FTSE 100 has been a dozy broken market for a generation. It never recovered its footing after the dotcom crash and has been trading sideways ever since. Compared to the S&P 500 or the DAX, its performance is an unfunny joke. The CEO of the exchange isn’t even on the board of the London Stock Exchange Group. Companies are delisting at a pace and even the big companies are evaluating a move away from London as their valuations are often worse than half of what they would be in the U.S. or Germany.
Yet now it looks like the FTSE 100 is waking up.
The market is fundamentally extremely cheap and there are plenty of reasons why it should rise a lot but that hasn’t kept it out of the bargain bin for years. Yet the chart says pressure is building for a repricing.
Below is my master chart and with the recent market weakness created by geopolitical news, I was fully prepared for a decent correction, yet the market has bounced back and is now making new all-time highs.
And we can be forgiven in seeing that the FTSE is now on the fast hockey stick structure rather than on the slower old fashioned “trend.” That developing power curve is what has my attention, so it’s good to see it continue to develop.
That is extremely bullish – but wait, let’s see the big picture.
That big picture is a bull market for two to three years, maybe even five. So all anyone who is vested needs to do is sit back and ride.
Trading can spoil all that, of course, as trying to time such a long term trend can hurt the returns on simply buying and holding and selling at targets and reinvesting in what remains cheap.
So here is another look at the FTSE, which is the basic driver of the U.K. market:
That is a break out, but wait it’s not totally safe yet. A few more plus days in open ground and that new reality will be real. It does look delicious to me and the fact that values are so incredibly low underlines that there is a long road up from here.
Don’t forget, inflation is pumping nominal value into the market in many ways, so sadly it might not prove to be a rally delivering as much new buying power as you would like, but the bottom line is it’s better to be in a rising market than out of it with your cash being eroded.
The punchline is I see 10,000 on the FTSE in this run and you cannot call the absolute terminus on this sort of run as there are many factors that could push levels much higher.
If the era of U.K. FTSE 100 stagnation is over, as I think it is, even if the marketplace itself suffers, then it’s time to sit tight, buy cheap stuff, sell expensive and enjoy the ride; it’s going to be a long profitable one.
Read the full article here
