Anybody who has tried to hold an inflatable beach ball under the water knows that your arms will get tired long before the ball will. This analogy sums up what is happening with the FTSE 100 index currently. Johnnie Foreigner keeps pushing the FTSE 100 down with all his European bad news, but at the slightest whiff of good news the market rises swiftly. Not that you would know this by reading a newspaper or watching the TV; good news is no news. “The FTSE 100 rose by 3% again yesterday adding £4.1 billion to investors pockets”. (I made the last bit up as I have never read or heard a comment like that. Because that would be good news and so isn’t allowed).
What I didn’t make up were the numbers; those bits were true. It did rise by 3%! The overall value of the FTSE 100 index was £1,549 billion in June 2011* and from “Millions and Billions” we now understand just how big a billion is. The FTSE100 companies are worth 1,549 very big numbers indeed. Somebody with too much time on their hands added up the cash holdings of these companies which came to £75 billion, just waiting to be spent.
Well that brings the UK market back now to exactly where it was 12 months ago. So no capital growth then, but there was still a 3.2% dividend payout. The Vanguard Fund we recommend has grown by 8.8% and delivered a yield of 4.8%
Now from this point last year the market reached 6000 points by Christmas. Let’s hope Santa is on his way again. Since 15th August the FTSE 100 index has crossed the 5200 level 15 times. Each time it drops below 5200, the news suggests we are going to continue to sink to the bottom of the sea, and when it crosses going North we get…………………silence.
Keep Calm and Carry On.
But I still think we should sell and retain some profit at levels around 5800.