FTSE Heading Into Bubble Territory

Analysts are becoming concerned that the Brexit could lead to inflationary growth - which would be good for stocks, but bad for bonds.

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shareprices.com - Wednesday, January 18, 2017

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The stock and currency markets have changed significantly since the news of the Brexit. Companies that operate exclusively in the UK, isolated from the west of the world, see the Brexit as being bad news. The FTSE 100 fell sharply after the news of the referendum, but it has recovered significantly since then, and it is hard to dismiss that recovery given how sustained it has been.

On the surface, the FTSE 100 has made substantial gains over the last six months, but when you look at the UK’s leading index in comparison to the rest of the world it becomes more clear that the Brexit has indeed done serious damage to the UK’s economy. If an investor were to put their funds in an index outside of the UK, then they would have seen ten percent better performance than the FTSE 100. The under-performance all started with the referendum.

Multinational stocks are doing better because of a recent global recovery. Commodity prices are rising, and there has been a general level of optimism in Europe and in the United States, as well as fresh optimism in emerging territories. Some analysts are concerned that the FTSE 100 is heading into a bubble, but the P/E for UK shares is actually fairly average, at 13. The median for the last 45 years has bee 47.

 

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