Following a dip in mid-April, the FTSE 100 has roared nearly 5% higher. It is now trading close to its all-time high, and for many investors it is a hugely profitable time. Share prices across a large number of sectors have risen in recent months, leaving many portfolios in much better shape than they were at the start of the year.
However, could now be the right time to sell FTSE 100 shares in the hope of a better buying opportunity further down the line? Or is the current Bull Run set to continue?
The outlook for share prices is always uncertain, but at the present time it is arguably less certain than it has been for some time. Certainly, there are no obvious major economic crises or events which an investor can point to as potential positive or negative catalysts. But at the present time it is hugely challenging to predict whether the index will rise or fall over the medium term.
Share prices are undoubtedly high on a relative basis right now, since they are at almost their highest point in history. Therefore, the index is unlikely to be viewed as ‘good value’ by many investors. However, neither does it appear to be grossly overvalued, with it having a dividend yield of 3.8%. This suggests there may be further for the UK’s main index to run in the coming months.
Of course, a number of events are set to take place in both the political and economic spheres which could impact on the FTSE 100’s price level. For example, Brexit talks are ongoing and their outcome could have an effect on the FTSE 100’s price level. Similarly, another general election seems likely before 2020, while there is continued uncertainty in the Korean peninsula. In the economic sphere, interest rate rises seem likely over the next couple of years, and they have historically had some effect on share prices.
The problem though, is that the impact of all of these events on share prices is very difficult to judge. Recent history does not help either, with the FTSE 100 rising after the EU referendum, the Trump election victory and the UK general election. This was in contrast to many forecasts, which predicted falls following the unlikely results. As such, even if the political and economic outlooks pan out as expected, their impact on share prices may be somewhat surprising.
Perhaps the most pragmatic move for Foolish investors to make, given the above, is to maintain their exposure only to FTSE 100 stocks which offer wide margins of safety. That way, if the index falls they may offer more support than most of their index peers. And should the index continue its Bull Run, they may stand to benefit to an even greater extent in the long run.
The effect of Brexit
In the near term, fear and indecision stemming from the EU/UK Brexit talks could hurt share prices. That’s why the analysts at The Motley Fool have written a free and without obligation guide called Brexit: Your 5-Step Investor’s Survival Guide.
It’s a simple and straightforward guide that could help you to find the shares in the FTSE 100 which are best able to cope with the risks posed by Brexit.
Click here to get your copy of the guide – it’s completely free and comes without any obligation.
- You can retire with a million with the FTSE 100 in just two easy steps
- Why the FTSE 100 could be the best way of beating inflation
Peter Stephens has no position in any 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.