The FTSE 100 Crash Is Santa’s Gift To You!

Don’t panic over the lack of a FTSE 100 (INDEXFTSE:UKX) rally – Santa Claus knows what is good for you this Christmas, says Harvey Jones

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.

Block your ears if you still believe in Father Christmas, because there is no credible sign of a FTSE 100 Santa rally this year. Instead, his elves have been working on a rather different kind of gift.

Rather than a rally to push the index over its 52-week high of 6878, we’ve had a crash instead. The FTSE 100 dropped 5% last week, and is now a whisker away from 6300.

I certainly didn’t put that on my Amazon wishlist.

Bah! Humbug

It’s hardly surprising that Santa hasn’t delivered the goods. There has been little for investors to ho-ho-ho about lately. Slowing Chinese GDP growth, the EU omnishambles, a self-inflicted Russian meltdown and Middle East mayhem have all dented the Christmas spirit. 

Even the best gift the West can get, the falling oil price, has failed to lift the gloom. Instead of applauding lower pump prices, analysts are warning that it is a symptom of slowing global growth, and could tip us into outright deflation.

‘Tis The Season To Be Sorry

The gloom mongers have also warned of nasty knock-on effects if the big oil producers such as Russia run into deeper financial difficulties, or US shale prospectors are unable to pay their debt obligations. 

And there is the underlying fear that this is a Saudi gameplay to drive out cheaper competitors, that will eventually push up prices for all. US ‘stripper’ wells are already suffering.

No wonder Santa isn’t delivering this year. He likes cheerful little boys and girls, but there aren’t many around.

Jingle Hell

I’m actually relieved we haven’t had a Santa rally. I’d hate to end this turbulent year on a false tide of goodwill to all men, only to see it ebb suddenly in the new year.

2015 looks set to be turbulent. The Eurozone could finally implode, Putin may get desperate, Shinzo Abe in Japan is making an all-or-nothing bet with his country’s future, and as we have seen in Sydney, the spectre of Islamic terrorism is only a lone crank away.

It would be crazy for Santa to drive the FTSE 100 higher right now. I’m glad to see it slipping to 14.54 times earnings, below the 15 that is usually seen as fair value.

That lifts its yield to 3.70%, which is highly tempting, as the prospect of a base rate hike in 2015 slowly recedes.

The current FTSE 100 crash isn’t what you asked for, but don’t be disappointed. It may turn out to be just what you always wanted.

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.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended shares in Centrica. 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 »