So the FTSE 100 is falling again. At around 6,150 as I write, it’s lost about 75 points on the day, and it’s more than 970 points (nearly 14%) down from its high of 7,123 points earlier this year. Still, the UK’s top index is past its sub-6,000 dip to 5,768 points and surely isn’t going to plumb those depths again, is it?
Well, I reckon it is, and that there’s worse to come. You see, the indicators that have pushed the FTSE down so far aren’t actually getting any better. The price of a barrel of oil got close to $55 at the end of August, but it’s been slipping back again and the stuff is currently selling for under $48. And although some analysts are expecting to see $55 again by the end of the year, there’s sure to be a lot of further volatility. Ironically, most companies are net consumers of energy and so cheap oil will benefit them, but the City sees it as a bad sign.
There’s more…
Next we’ve got all those metals and minerals. Glencore has cheered the market with news of its plans to cut its debts and suspend some copper production, and copper prices have been recovering — leading many to think that the mining slump is past its worst. But iron ore is the biggie, and it’s still hovering around long-term lows and is expected to fall further.
Then there’s China, whose economy is in the painful transition from big state-run projects to private enterprise — and the recent boom and bust in its state-manipulated stock market has seriously burned investors and damaged confidence.
So with all this uncertainty, it’s my prediction that we’ll see the FTSE back below 6,000 again before 2015 is out.
Hope I’m wrong?
If you own shares, you probably hope I’m wrong — and I own shares myself, so you’d expect me to hope I’m wrong too, yes? Actually, no!
I bought some light bulbs today for 79p each, when the exact same ones were £2 at Asda — and why on earth would I want to pay the higher price? It’s exactly the same with shares. Like most people reading this, I imagine, I’m still in the net buying phase of my investing — and as long as a company I want to buy remains worth buying, I’d much rather pick up its shares for 79p each than £2, just like my light bulbs.
The British and American economies are rapidly recovering strength, and even the euro-hobbled economies of Europe are slowly turning. And in the long term, the oil price will surely recover, commodities will see an upturn in demand and prices, and China is going to be just fine — its billion or so hard-working and business-savvy people aren’t going to be held back, no matter how incompetent its government.
The future is good
No, I’m a big optimist. And when I eventually cash in my shares in another 10 or 15 years or whenever, I’ll be that bit better off thanks to today’s bear market. And I’ll be doffing a cap to all the pessimists who sold me great shares at silly low prices — especially the ones who are going to sell me them even more cheaply later in the year.
