Bond yields are rising, US tariffs are coming, and UK businesses are facing higher costs in the form of taxes and National Insurance. But either nobody’s told the FTSE 100, or it doesn’t care.
The UK’s largest index has just hit record highs, which is impressive considering what’s happened to the JD Sports share price in the last three months. So should investors plough on regardless or look elsewhere?
Keep buying?
Different investors have different strategies and that’s a good thing – as with clothes, there’s no style that suits everyone. But I think investors right now should consider sticking to whatever their plan is.
For some, that will involve investing a fixed amount regularly into a diversified index, such as the FTSE 100. It’s as exciting as magnolia paint, but it does come with some big advantages.
One is that it takes away the difficulty of working out when shares are cheap and when they’re not. Buying regularly will eventually generate a good result as long as stocks do well over the long term.
The other is that it removes the need to work out which stocks have the brightest prospects. Investing across an index means investors will benefit whether BP outperforms BT or the other way around.
This is a good plan, but the point is investors are meant to keep buying regardless of whether prices are low or high. So the FTSE 100 being near its highs isn’t a reason for anyone doing this to avoid it.
Stock picking
Not all investors do this – some are so horrified at the idea of owning things they don’t want or buying stocks at high prices that they prefer to focus on individual companies. I’m one of these investors.
There are definitely some bits of the FTSE 100 I’m staying away from right now, but this isn’t the case across the board. Earlier this week, shares in Rentokil Initial (LSE:RTO), which I already hold, once again hit my target buy price.
The company has had some difficulties lately. It acquired Terminix – a big US competitor – in 2022 and seeing it try to integrate the business has been a lot like watching a python trying to eat an antelope.
One difference between the two is that nobody’s trying to organise a class-action lawsuit against a snake. There’s one against Rentokil though, and that’s why the share price has been falling this week.
That’s something investors should consider as a genuine risk. It’s hard to know exactly what it might amount to, but it’s well worth keeping an eye on for anyone interested in the stock.
My money however’s (quite literally) on the FTSE 100 firm. I think the pest control industry’s likely to grow steadily over time and a strong position in this industry could well turn out to be very valuable.
Opportunities
The FTSE 100’s showing impressive resilience in a difficult economic environment. But whether it’s regular investing or looking for specific opportunities, I don’t think investors should be staying away.
For my own portfolio, I’ve got an eye on Rentokil, plus a couple of other shares. I’m paying close attention to what the bond market’s telling me, but stocks still look attractive to me right now. I may buy more.
