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Brian Tora: FTSE flirts with all-time high


I spent last week on the island of Madeira in the middle of the Atlantic Ocean, basking in an unusually hot and dry spell of weather and watching the FTSE 100 Share index get tantalisingly close to its all time high. Despite renewed strength in mining shares, the long hoped for breakthrough had failed to materialise by the time I was obliged to put pen to paper. Perhaps that time has come by now.

The US market did make it into new high ground, but then it has been comprehensively outperforming our market for some time. And this despite the rather better economic performance we appear to be putting in right now. Contrast our retail sales figures, published last week, which showed a near 5 per cent leap, year on year, in April. Similar figures from America were barely in the black.

The nevertheless encouraging tone to our market reminded me of the call one of my colleagues made earlier in the year when he withdrew his expectation that the Footsie would move above 7,000 and forecast a significant retrenchment. This was based on technical analysis, of course, but it all goes to show that whatever measure you use to forecast future market trends, the final outcome is unlikely to prove as expected.

Markets are, after all, merely a reflection of the dynamism of society. At the turn of the new millennium I accompanied one of the fund managers we employed to the United States, taking a group of big hitting IFAs to meet various companies and economic gurus. His predominant theme at the time was one of demographics. To be precise, he was calling the end of the bull market in the western world to coincide with the retirement of the baby-boomer generation.

As one of the earlier members of this generation, I took considerable interest in what he was propounding. The significant year in his mind was 2013, when those born in the peak birth boom year reached the all important age of 65, retired and started spending their accumulated savings. He talked a good story, but how could he know then of the rapid advance of emerging nations or of the impending financial collapse engendered in no small part by governments eager to keep their electorates happy by encouraging them to spend.

But demographics remain important. The social services built in the aftermath of the Second World War are simply not affordable with an ageing population and a declining birth rate. This is not just a problem for Europe, America and Japan. China, too, suffers severe demographic pressures, though fortunately they do not have the expensive social infrastructure to maintain that has proved such a problem in Europe.

Interestingly, this helps underpin the active management argument. While short term market trends remain impossible to forecast and longer term demographic issues simply lead those who study them to become increasingly pessimistic, a dynamic society will produce new businesses and different corporate leaders. When I started out in the investment world, the giants of business were such names as ICI and GEC. Where are they today? Though ICI did spawn AstraZeneca – much in the news right now.

The impending merger between Dixons and Carphone Warehouse demonstrates how retailing is changing. Indeed, many of the global business leaders – particularly those in the technology field – were not around a quarter of a century ago. By then I’d already tucked twenty five years of investing experience under my belt and probably felt I knew it all.

So I look to the future with confidence and no longer place much store in arbitrary hurdles being cleared. It would be nice to see the FTSE 100 pass the 7,000 mark, but even if it doesn’t, there will be opportunities a-plenty for astute investors. And with baby boomers collecting their pensions, whole new generations of savers will need to prepare for the future. 

Brian Tora is an Associate with investment managers JM Finn & Co



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