Are we getting a little excited yet?

The FTSE 100 and world markets in general have experienced a long awaited good run since October. Instead of basking in the glory of a FTSE 100 at it’s highest point in almost 5 years, I start worrying. Have we got a little ahead of ourselves again?

Tomorrow the UK Gross Domestic Product figures{{1}} will probably show at best a flat last quarter to the year. But we are ready for the figure to be a negative. We won’t get too excited at this stage as we must remember these are just an initial early guess that can be revised up or down.

Anyway the world will keep turning as normal. Our GDP since 2008 has not quite got back to where it was. Both Germany and the US have since turned positive and China has risen nearly 50%. The end outcome will be a further weakening of the pound against most world currencies and the threat to our fabled AAA rating. (It is certain we will lose it eventually) We have positioned our client investment portfolios to be global and held in other currencies predominantly, such as the Euro and the Dollar, so further weakness in the Pound actually benefits us. Even our UK denominated share fund receives over 60% of it’s income from abroad.

So we will only get ahead of ourselves when the world does. We are a tiny player. Expect the final very top of this current rally to consist of nothing more than a couple of hundred points of froth, which will be blown away fairly quickly at some point in the future. However it is still our expectation that markets will end 2013 higher than they are today.

[[1]] The GDP figure is an estimate of the value of all recognised final goods sold in the quarter. It only includes recognised goods and not their components. This means you don’t count the sales of bricks if you are going to count the house sale also. It obviously does not account for the grey economy – cash jobs – which tend to rise when times get hard or taxation rises.[[1]]