FTSE 100 To New Peak? – Japan Hesitating – Income Tool Updated

Fri 15 Mar 2024

By Brian Dennehy

Access Level | public

Market commentary


quoteIt’s time to dust off the Ides Of March research. Officially it is 15th March, but to be historically accurate we prefer 25th March, the day of the month’s full moon. As one investment analyst put it:

“Since time immemorial the period we associate with the Ides of March has been viewed as a time when human spirits reach a nadir and begin to improve.”  (Paul Macrae, March 2009)

The historical evidence also suggests the opposite extreme, with human spirits reaching an emotional zenith of over-confidence, and then dropping like a stone. This history is covered in more detail in Beware The Ides Of March

Today the pivotal US market is indeed extremely emotional, exactly what we would expect midst an investment mania. The revival of bitcoin to a new peak is sufficient evidence on that point.

The lesson? If you are feeling like you must buy, if you are suffering FOMO (Fear Of Missing Out), be very careful. See the 1st March Friday Note on “rational speculation”.

Back to more earthly matters, on Tuesday and Thursday the US inflation numbers could have been interpreted negatively, but the S&P 500 is not for turning. Similarly no one blinked at barely visible economic growth in the UK, though to be fair the UK stock market is already cheap, discounting this lethargy. 

It was notable that this was the first week in quite a while when the FTSE 100 outperformed its mid cap cousin, the FTSE 250. If I exclude all the noise (and there is a lot of noise), and just focus on the FTSE 100 chart, it has the distinct look of an index breaking higher. If so, it should quickly break up through the previous all-time high a little above 8000, 3.6% ahead. Our textbook analysis implies a peak around 8200, 5.4% ahead.

For context, the S&P has 3.8% to go before hitting the 5361 target set out in the 1st March Friday Note. Similarly, the 21000 target for the FTSE 250 is 7% above today’s level.

It promises to be an interesting couple of weeks.

Warning signs from Japan. As we have highlighted numerous times, the Nikkei has been driven to notable gains in recent months as global investors arrived a bit late to the party. What many seem to have overlooked is that the Nikkei is dominated by large exporters, who have been huge beneficiaries of the weak yen. 

Over the last week or so the penny has begun to drop. As rumours abounded that Japanese interest rates will go up very soon (in total contrast to other major economies), the yen strengthened and the Nikkei slipped. Perhaps just a well-earned breather, but upside from here might be limited… but for the smaller companies, for whom the currency is of no great concern… and they are exceedingly cheap.

In contrast, the Chinese stock market indices showed some signs of life over the last week, though more evidence is needed before we can be more confident that the 17-year bear market is finally over. Look out for strong moves by copper and copper miners, which will quickly reflect growing belief in a China recovery.

Last but not least, have you checked our unique Income Tool lately? The numbers have been updated. This is a great way to quickly identify the funds which prioritise growing the payout year after year, and prioritising those with higher yields and decent capital growth.


Market commentary


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