Are we heading for a bubble?

talexuser

My (relatively conservative) isa funds are more than 5% up since 23rd June, and (only slightly less conservative) dealing account 11% up. Is this just noise?

We have no trade deals finalised, no great manufacturing resurgence, some purchasing managers report saying the biggest fall in future orders since the credit crunch, and a fall in sterling that should help our (small) exports, but should increase inflation for all the stuff in the shops made overseas? I can't see how any fundamentals have changed for this optimism.

Has the base rate already fueled another rush to equities from bonds and savings - what do you think?

Thrugelmir

Money is chasing yield and therefore pushing equity valuations higher. Underlying data suggests that the picture is far from rosy. The market , in general, may be getting ahead of it's self.

BananaRepublic

Without doubt, we are always heading for a bubble, unless the market is plummetting, which is not the case. The nature of the market does seem to be boom and bust, that's market sentiment for you, totally rational ...

Strummer22

In short: yes, probably. Even in the shortest of terms: the FTSE 100 is 5% higher than it was a week ago, and is at a 14-month high. Alright, a bunch of companies released results, but as far as I saw there was little that was unexpected. So why is it 5% higher than last week if fundamentally nothing has changed?

We'll probably see a correction over the next few months, but not a crash as so many companies earn their money overseas but report in sterling, so the weak pound inflates their earnings. And for anyone thinking of trying to get out at the top before any correction comes... who do you think you are, Mystic Smeg?

AnotherJoe

talexuser wrote: »

My (relatively conservative) isa funds are more than 5% up since 23rd June, and (only slightly less conservative) dealing account 11% up. Is this just noise?

We have no trade deals finalised, no great manufacturing resurgence, some purchasing managers report saying the biggest fall in future orders since the credit crunch, and a fall in sterling that should help our (small) exports, but should increase inflation for all the stuff in the shops made overseas? I can't see how any fundamentals have changed for this optimism.

Impossible to say without knowing what your funds are but those figures could be entirely down to the fall in the Pound. No optimism needed in that case.

Eric_the_half_a_bee

"Are we heading for a bubble?"

Anybody with the market insight to answer this question is on their private Caribbean island, drinking Margaux and surrounded by scantily clad dancing girls/boys, and certainly not likely to be wasting time surfing message boards to answer questions like this.

For the rest of us, hold on to your investments for the long term and understand that trying to time the market is a fool's game.

Strummer22

Eric_the_half_a_bee wrote: »

For the rest of us, hold on to your investments for the long term and understand that trying to time the market is a fool's game.

I've not been investing for decades like some have so I'm far from an expert, but one thing I've noticed about my investments that would have really improved my returns is thus: if you like a stock or fund and buy it, and then are dismayed when it drops 15%, don't be. So long as there's nothing glaringly obvious (e.g. you bought VW and then there was the emissions scandal), buy more.

I didn't, partly because I was worried and partly because I didn't want to skew my preferred mix of cash and equities with house buying on the agenda... BUT, for the most part, you'll just be buying the same companies with the same prospects at a cheaper price. The occasional dud that never recovers should easily be made up for by those that recover (and then some) so long as your portfolio is diverse and you have a long term investment horizon.

That is the only 'timing the market' I think I can advocate. Viewing your portfolio will tell you what's cheaper than when you bought it. A bit of research will tell you if there's any reason that it would be expected to get cheaper still. If not, then that would be a good 'time' to get more cash in the market

talexuser

Nobody mentioned timing the market (I've held one of my first time funds for 25 years). I'm just at a loss to explain the reverse to optimism compared to the fundamentals and base rate cut which can only be seen as a panic measure, and sterling fall which can't explain all of it - my UK smaller companies section is back to where it was for instance.

Glen_Clark

Shares priced in pounds have risen on the fall in the value of the pound. Then the BoE are lending the Banks £100bn at 0.25% in the hope that companies will borrow and invest it. But companies don't want to invest in case they are on the wrong side of trade barriers in a couple of years time. All that money has to go somewhere so much is going into inflating share prices and company directors bonuses.
You shouldn't borrow against future earnings without good reason. But the Government has been borrowing to blow on consumption and pumping up house prices with 'Help to Buy'.
This is unlikely to end well, certainly not with a revival in the value of the pound which would bring share prices back down.

Thrugelmir

talexuser wrote: »

Nobody mentioned timing the market .

The market is a very generic term. The market may be up but many company share prices will still be lower. Finding the pricing anomalies takes time but rewards pay back over the longer term.

EdGasket

What's the alternative? Watching your cash devalue with low interest rates vs inflation and the gov't printing money.