The FTSE 100 Will Keep Falling In Q4…

After a disappointing Q3, here’s why the FTSE 100 (INDEXFTSE:UKX) looks set to fall further in Q4

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The third quarter of 2014 was an eventful one for the FTSE 100, with the index falling by 1.8%. The Scottish referendum held shares back to a certain extent, with the uncertainty surrounding the future of the UK keeping many investors away from the index.

Furthermore, the situation in Ukraine remained tense and highly uncertain, while sanctions against Russia were stepped up and could prove to have a major impact on a number of global companies moving forward. In addition, air strikes commenced in Iraq and the situation there remains a potential worry to investors in Q4.

However, Q4 is set to see what could prove to be an even more impactful and uncertain event, which has the potential to push share prices even lower. As a result of this, Q4 could prove to be a tremendous buying opportunity for long-term investors.

For the last few years, the US economy has essentially been on ‘life support’ from the Federal Reserve. It has purchased $billions of assets each month, which has supported the US economy during a highly challenging period in its history. However, the programme is due to end this month and it could have a considerable effect on the FTSE 100’s price level.

That’s because in recent years many investors have adopted a ‘risk-on’ attitude for the simple reason that, if things in the wider economy worsen, the Fed will simply step in and do something about it. This attitude has enabled the S&P 500 to reach record highs and, it could be argued, has diverted attention away from the uncertainties that continue to exist in the US economy. These include a slow recovery in the jobs market and subdued demand for housing, given the ultra-loose monetary policy that has been pursued.

So, with the Fed’s monthly repurchase programme set to end, it would be of little surprise if the FTSE 100 pulled back somewhat during Q4. That’s not to say it will necessarily crash, but its end could force investors to rethink their stance and adopt a more pragmatic outlook moving forward.

This, then, could provide investors with a tremendous buying opportunity. While the S&P 500 has hit record highs in recent years, the FTSE 100 remains below where it was 14 years ago and, since then, earnings have grown considerably despite the credit crunch.

As a result, a relatively large number of high-quality stocks are trading at very attractive prices. A pullback could make them even more so, with Q4 having the potential, therefore, to be a superb time to add stocks to long-term portfolios.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »