So the FTSE 100 didn’t crash to 5000 after all, as some doom-mongers suggested it would. In fact, it didn’t even break through 6000.
The index dropped 9.9% from its 52-week high of 6878 to a low of 6196, just short of the 10% required to qualify as a technical correction.
For me, that made it the perfect sell-off. A frisson of fear shot through markets, giving nippy investors the chance to buy their favourite stocks or index trackers at a juicy discount.
I hope you screwed up the courage to take advantage, as I was urging investors to do. I topped up my FTSE trackers, and with the market above 6550 at time of writing, I’m already nicely ahead.
Warren Buffett’s old maxim about getting greedy when others are fearful has worked again.
The Magic Number
The question now is how far the current rally can run. Are we set for another end-of-the-year stock market surge? The signs are positive.
So positive, in fact, that the all-time high of FTSE 7000 could suddenly be on. Who would have guessed that just a few weeks ago?
Japanese QE got investors revving their engines. Better-than-expected US company earnings have added some juice.
Annual US GDP growth of 3.5% in Q3 further cheered markets.
It’s amazing how a few positive sets of data can turn sentiment around.
Never Too Late
I love a good correction. A swift market rebound is even better. Don’t kick yourself too hard, you haven’t left it too late to take advantage.
The FTSE 100 isn’t overpriced according to conventional metrics, trading at 13.96 times earnings, against the long-term average of 15 times.
And with base rates stuck at 0.5%, the 3.54% yield on the index is a dream for income seekers.
As are many individual company stocks, such as British Gas owner Centrica, which yields 5.69%, GlaxoSmithKline at 5.66%, Vodafone Group at 5.36%, oil giant BP at 5.33% and HSBC Holdings at 4.6%.
So there is still time to fill your boots.
Latest UK manufacturing PMI data looks promising, up from 51.6 to 53.2 in October, according to Markit, as Blighty leads the recovery.
The major threat to the recovery comes from the eurozone (as ever), where manufacturing PMI data disappointed again, and a slowing China.
That won’t be enough to stop markets in their current mood. It could be time to place your bets on FTSE 7000.
