The benchmark FTSE 100 index is nudging all-time highs once again and naturally, everybody is starting to panic. Well, not everybody, but the usual fear-mongers.
I am still trembling after reading a harrowing piece telling me that markets are set to crash from their record highs as valuations hit levels last seen in the dotcom bubble and Wall Street Crash. A separate article warns that volatility is set to increase as Trump starts sabre rattling over North Korea. Others say higher interest rates and the end of quantitative easing will deal the death blow.
They might even be right. Who knows? You can always find reasons to call a stock market crash. The higher markets climb, the more shrill those warnings become. This always happens when the FTSE 100 is buzzing around its all-time high.
Stay calm, be cool
Personally, I think the FTSE 100 at 7,555 is something to celebrate, rather than dread. It manoeuvred the tricky months of September and October with relative aplomb. November is often a good month and over the last 20 years the US stock market, for instance, has posted average gains of 1.9%, making it the third best month. Then we may have the seasonal excitement of yet another Santa rally. For the FTSE 100 to hit that 8,000 mark, the index only needs to rise 6% from here and there are good reasons why that could happen.
First, China, the world’s second-largest economy, is still booming. Latest trade figures show imports surging by a remarkable 18.7% to September, which suggests Chinese factories continue to see strong demand for their products. The news drove the MSCI’s All-Country World Share index to a new peak of 494.84 points. London isn’t the only market booming.
The IMF reports that the global recovery is continuing, and at a faster pace. “We see an accelerating cyclical upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia,” it said last month, and upgraded its growth projections by 0.1% to 3.6% for this year and 3.7% in 2018.
Look beyond Christmas
The global economic backdrop looks relatively benign: robust growth, falling unemployment, subdued inflation, stable foreign exchange markets, and to top it all, buoyant share prices. You can still make a million on this market.
Naturally, a black swan event could sink us in a moment. The future is not ours to see but that also applies to the doom-mongers who have been calling a stock market crash for the last five or six years, and called it wrong every time.
To 10,000 and beyond
While seeing the FTSE 100 hit 8,000 by would be a lovely Christmas present, in the longer run it is neither here nor there. Markets do not run to a set timetable. They go up and down, and none of us can predict when. History shows the only thing you can say with any certainty is that if you put money into the market and leave it there for the long-term, while reinvesting your dividends for growth, you will end up a lot, lot richer than you started off.
One day the FTSE will break through 9,000, 10,000 and beyond. You should start investing for that day now.
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Harvey Jones has exposure to FTSE 100 performance through the iShares FTSE 100 ETF. He has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.