In order to avoid breaching the golden rule of balancing borrowing with surpluses, the economic cycle has been lengthened from seven to nine years, taking in the first two years of this Labour administration.The effect will be to create a more ben-ign situation. But the position at the start of New Labour’s first term was down to the legacy left by previous Chancellor Kenneth Clark. Without the revenue surpluses that were inherited, our prudent, iron Chan-cellor would either have to raise taxes or admit to breaking his self-imposed rule. The reality is that tax increases could be on the way. We have seen significant sums of money raised for the Exchequer through the abolition of ACT and the increase in NI contributions. Yet the Chancellor has insufficient to fund an ambitious public expenditure programme without raising borrowing. And it looks set to get worse. Last year’s 3.2 per cent GDP growth stands little chance of being matched in 2005. Pessimists suggest it could halve by the end of the year although the consensus view is a less scary 2 per cent. So, if the outlook is as tricky as the Chancellor’s obfuscation suggests, why is the market so robust? Part of the answer lies in the way in which the nature of the UK’s premier bench- mark changes shape. Indices are essentially dynamic and the rise of individual sectors – or companies for that matter – can exert a considerable infl-uence on performance. The company that has been moving the market recently is Shell. Last week saw the culmination of the merger with Royal Dutch, bringing the combined value in the UK to a massive 130bn. And, of course, oil shares have been buoyant on the back of rising prices. Indeed, Shell, BP and BG – the old British Gas – now account for over a fifth of the value of the FTSE 100 index. Factor the risk that represents into your investment planning when you next consider buying a tracker stock. Of course, we have been here before. In the TMT boom of the late 1990s, Vodafone grew in value to become worth more than 13 per cent of the index following its acquisition of Mannesman. Telecomm-unications became a dominant sector then. The fall from grace of these high-flying stocks was very influential in the bear mar-ket featuring more in the headline index than among mid and smaller capitalisa-tion stocks. Telecommunications remains important but not the influence it once was.