Hobson: FTSE 100 Will Hit 8,000

THE WEEK: The FTSE 100 will edge higher, says Morningstar columnist Rodney Hobson, but it is getting harder and harder to find good investment opportunities

Rodney Hobson 26 January, 2018 | 10:04AM
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the bull market will continue says Rodney Hobson

We all know forecasting is a mug’s game and, as I have written many times before, the further out you forecast the more likely you are to be thwarted by some entirely unforeseen event. As a small nod to caution, I try not to make forecasts for the new year without at least seeing what sort of start we make to January.

On the whole, not a bad one. At home, the pound has edged higher, especially against the weaker dollar; unemployment has fallen again; wage rises are pushing higher just as inflation may have peaked; government borrowing is shrinking; manufacturing continues to enjoy buoyant order books. The devastation caused by the collapse of outsourcing group Carillion has been minimised by rivals picking up the pieces, although it will be keenly felt by its subcontractors and there will inevitably be some knock-on effect.

Globally, economies are picking up, with tax cuts set to stimulate the US and economic growth finally taking hold across the Eurozone, where quantitative easing was somewhat later arriving thanks to the cumbersome nature of the European Union.

The recovery in sterling, although not yet back to pre-referendum levels, means an end to the artificial boost that currency translations have given to UK-based companies but that won’t stop genuine improvements to profits coming though in 2018.

As always, the big blot on this seemingly sunny landscape is that we don’t know what is around the corner. The biggest fear is that another banking crisis will find governments across the world even more indebted and less able to cope than last time. It could happen – indeed, some would say it is inevitable. I just don’t see it happening this year, though.

It is hard to find really great buying opportunities after stock markets have done so well for the past nine years but that doesn’t mean we are at the end of the line. There are always plenty of warning signs, ignored by most people including me but there all the same, before markets fall. Severe bear markets have something that prompts them and there is no prompt at the moment.

So, my view is that the FTSE 100 index will top 8,000 points this year. It could come sooner rather than later. When it does, I’ll have another think about how long this bull market can continue. Until then, I’m staying fully invested and, in fact, looking to mop up the remaining portion of my ISA allowance for 2017-18 before it is too late.

Kier: The Anti-Carillion?

It’s a mystery to me why any private company can make a financial mess of working for the government, when it’s all stacked against the taxpayer, but there is no accounting for the sort of greed that has, at various times and in various ways, beset companies such as Carillion.

So, it was reassuring to read the update from construction and public services group Kier (KIE), which is picking up work on the HS2 vanity rail project that should have been done by Carillion. Kier’s debt has been a worry but it says it is reducing the burden while growing its order book and its profits.

The shares took a battering last week in the wake of the Carillion fiasco but even so, I thought the 15% rebound in Kier’s shares on the day of the announcement was a bit over the top. They have been on the slide for best part of a year, losing more than a quarter of their value in the process, so this could be a dead cat bounce.

If Kier sticks to its promise to reduce debt, then fine. The temptation, with one major competitor out of the way, will be to bid for more and more contracts and let the debt target slip.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Kier Group PLC160.60 GBX2.55

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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