Newspapers usually don't bother putting news about the stockmarket on their front pages unless something really exciting happens. This week, it seems something really exciting did happen. "Shares rocket to record highs," said the Daily Express.
"FTSE 100 hits all-time high," said The Daily Telegraph and Daily Mail. "Like it's 1999: soaring FTSE at highest level for 16 years," said The Independent. Even the usually sensible Times wasn't immune to the overexcitement: its headline on the matter was "investors' delight as shares smash record".
This is, of course, all nonsense. The FTSE 100 is a nominal index, not an inflation-adjusted index. Adjust for that and if you want the numbers to mean anything relative to real wealth, you have to and the index is nowhere near its past highs. In 1999 it hit 6,930. On Tuesday this week it ended the day at 6,949.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But in the intervening 16 years, prices in the UK as measured by the Retail Price Index (RPI) have risen by more than 50%. So to beat its all-time high in any way that actually matters, the index would now need to be over 10,000. And that, clearly, is some way off.
Still, that doesn't mean that investors who put money in a tracker fund at the market's peak in 1999 haven't broken even: add dividends in, says Adrian Lowcock of Axa Wealth, and the stocks in the FTSE 100 index have returned 66% in nominal terms since the peak a real return of just over 1% a year. That's better than nothing, of course. But as the Financial Times says, perhaps we should "keep the champagne on ice".
So what next? Matthew Lynn looks at the psychological effects the post-1999 bear market has had on those in their 20s and 30s he reckons their miserable experiences will be a barrier to the creation of a new "euphoric bubble" in the next five years or so. However, he also notes that returns from the UK should be "perfectly respectable".
UK stocks aren't expensive: on a cyclically adjusted price/earnings (Cape) basis, they are knocking around the long-term average of 15 times. There's some insurance in that.
Those looking for something cheaper might consider the Gabelli Value Trust, or Brazil, where stocks have been ground down to a Cape of only ten times, making them some of the cheapest in the world.
Also of interest to long-term investors (which we assume most of you are) should be water: drought is nasty, but the threat of it also drives the kinds of innovations we want to invest in.
Finally, hang on to your gold amid all the "all-time high" thrills, remember the US is overvalued; global growth is pretty pathetic; the Greek situation is impossible to resolve; and global monetary policy is as bonkers as ever. There could be another global crash any day
-
The dangers of derivatives as the “Goldilocks era” endsEditor's letter This is no longer a benign environment for investors, says Andrew Van Sickle. But – as the recent pension-fund derivatives blow-up shows – not everybody seems to have grasped that.
-
What to do as the age of cheap money and overpriced equities endsEditor's letter The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losing money, says Merryn Somerset Webb. What can you do to protect yourself?
-
Investors are bullish – but be very carefulEditor's letter Many investors are buying the dip, convinced the latest upswing is the start of a new bull market. The odds are that it’s not, says Andrew Van Sickle. The bear has unfinished business.
-
The MoneyWeek approach to investingEditor's letter At MoneyWeek, our aim is simple: to give you intelligent and enjoyable commentary on the most important financial stories, and tell you how to profit from them. So how do we do that?
-
Celebrity bitcoin ads echo the subprime mortgage crisisEditor's letter A wave of ads featuring celebrities punting crypto to the masses are reminiscent of how low income Americans were encouraged to take on loans they couldn’t afford, says Merryn Somerset Webb.
-
Will the UK's property slowdown turn into a house-price crash?Editor's letter As the cost-of-living crisis intensifies and interest rate rise, it is hard to see reasons for UK house prices to keep rising, says Merryn Somerset Webb.
-
What sardines can teach investors about today's marketsEditor's letter A California tale of “eating sardines” and “trading sardines” can help us divide investments into speculative and real, says Merryn Somerset Webb. Something that's very useful when looking at today’s markets.
-
The market finally seems to be getting itEditor's letter Reality checks are coming fast to the markets, says Merryn Somerset Webb – with even 2022’s safe havens beginning to reflect recession worries.
