In the market it is often hard to see the wood for the trees. However, a really long-term view is a good place to start.
The current perspective is that the U.K. market is a dead duck. Brexit, transaction tax, poor regulatory oversight that forced institutions out of equities and into government bonds and an exchange that appears to have lost its way, can all be blamed, but while the reason is up for debate the outcome isn’t:
The gap is even worse is you go back 10 or 20 years further.
Another view of the wood is simply this:
That is an index rise of 1,000 points in a generation.
So it is a brave man who predicts a break out, or perhaps a foolhardy one. Well here I am.
Without doubt something is up in Europe:
This to me is because inflation in back under control and lower interest rates and/or QE is on the way and the market is front running that.
So is the U.K.’s FTSE about to finally get its game on or will it simply experience a weak rally and be dragged up a bit by everyone else?
Some of my readers will have noticed my “unorthodox” technical analysis in crypto and its accuracy has been uncanny as you can check here on Forbes for yourself. So here it is used on the FTSE:
If this is a repeating pattern the outcome looks like this:
That looks pretty spectacular but it is a 12% annual rise or 7% plus 5% inflation. In any event, you only have to look at U.S. markets to note this is not a crazy performance.
We will know shortly because in a few days the FTSE 100 will, if it continues its rally, make a new all-time high. A pull back or a series of new ATHs will quickly follow, which will be a strong indication we are in a new era for the FTSE.
As a contrarian I cannot resist the idea that we have at last arrived at a new U.K. stock market boom. The market is incredibly cheap and a wave of M&As is sweeping the top 350 companies.
So the play I like is the incredible low P/E big caps with their 5 P/E and 5%-10% dividends. What’s not to love?
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