View more on these topics

Brian Tora: FTSE nudges upwards but market sentiment remains cool

As signs of economic recovery continue, quality is the word on managers’ lips 


The FTSE 100’s flirtation with 6,800 is a sign that markets are still in good heart. Not that much of positive note seems to have grabbed investors’ attention.

Indeed, unemployment numbers appeared to edge up (the figures were more than a little confusing), making one wonder why Bank of England governor Mark Carney felt it necessary to change the rules on forward guidance. Still, the signs that the economy is improving nicely in good time for the general election next year have yet to dissipate.

So what changes to portfolio asset allocation look appropriate as we nudge our way towards a world of higher interest rates, less central bank intervention and slowing emerging markets?

Quality is the word on many investment managers’ lips these days. With mid- and small-cap companies having made the running for a little while now, perhaps all they are suggesting is that the large-cap stocks have ground to make up. That is certainly a thought.

It is what many US investment managers are saying, for much the same reason as their UK counterparts. The nifty fifty – Wall Street’s largest companies – have been left behind in the surge that has taken US markets to new high ground, so perhaps there is scope for catch-up. The US economic recovery is also further advanced than our own, though, like the UK, the country is considered to be too dependent on consumer spending.

Some other negatives are building. Signs of a slowdown in China are becoming more evident, while several profit warnings from leading companies suggest certain sections of the corporate world are finding the going tougher. As valuation ratings are not too demanding (though they are far from cheap), none of this need necessarily give investors cause for concern.

Technical analysts tend to be more black-and-white in their assessments, though. A colleague of mine who follows charts pointed recently to the strange dichotomy that has been developing in our benchmark index.

Apparently, while the past three highs in the FTSE 100 Share index have all been higher – a positive chart signal – the most recent three lows have all been lower, sending an altogether different message. This colleague also pointed to the possibility of two moving averages crossing each other on the way down, which many chartists would consider worrying.   

Candidly, I believe charts are of most use in telling you what has gone before, rather than in predicting the likely direction of markets, but I am conscious that they do have a following, so studying what they might tell us makes some sense.

At the very least, the combination of negative technical signals and worrying news on the corporate and economic fronts might lead some managers to sit on any cash they might have for future equity investment.

This leads me to the conclusion that we are most likely to be in what I can only describe as neutral territory for equity markets, such as here and the US. Investors may have to be prepared to sell if the upward momentum is regained properly, or buy should a significant setback occur. Both actions are likely to feel uncomfortable at the time but it is by betting against the crowd at times like these that success is most likely to be achieved.

Unfortunately, of course, no bell rings at the bottom or top of a market cycle, so those undertaking such counter-intuitive action may find themselves selling too early or seeing prices fall further after they buy.

All this assumes that no upsets take place on the geo-political front – not an easy call to make with the disturbing pictures coming out of Ukraine and no progress being achieved on the Syria front. 

For the time being, though, I plan to sit on my hands. I suspect many investment managers are already doing the same.

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




Labour: The Pensions Regulator should police auto-enrol annuity brokers

Labour would put The Pensions Regulator in charge of policing annuity brokers as part of radical plans designed to put savers at the heart of the UK market. Earlier this month, Labour set out its pension reform agenda ahead of the May 2015 general election. The party is focusing its attention on charges, annuities and […]

Adamson-Clive-FCA-2013 700 x 450.jpg

Latest FCA expenses reveal £4k New York trip for supervision head

FCA director of supervision Clive Adamson spent over £4,000 on a two-day supervisory visit to New York, figures published by the regulator show. The FCA has published details of the expenses claimed by Adamson, chief executive Martin Wheatley, chairman John Griffith-Jones and other senior staff between October and December. They show Adamson claimed £3,902 for […]


Alliance Trust Savings completes conversion to clean share classes

Alliance Trust Savings has completed its conversion to clean share classes, becoming the second platform to fully unbundle.  All bundled share classes have been converted to clean equivalents where an equal or cheaper net annual management charge is available. ATS gives clients an option to trade out of an investment free of any dealing charges […]


Lazard launches offshore mirror of global equity income fund

Lazard Asset Management has launched an offshore version of its £315m Global Equity Income fund. Domiciled in Dublin, the new fund will have both dollar and sterling share classes and will be managed by Patrick Ryan. The new fund will be run in a very similar way to the existing Global Equity Income fund, also managed […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm