Is the FTSE 250 overstretched?

Last week the FTSE 250 broke through a psychological barrier as it reached the 10,000 level. Despite the takeover friendly nature of the mid-cap market and the strength of the resources sector in particular, commentators suggest that valuations are become overstretched.

Last week, a psychological barrier was jumped when the FTSE 250 broke through the 10,000 level, says Ellen Helleher in the Financial Times. Few would have predicted it three years ago, but the FTSE 250 is now in bull-market mode. Indeed, the market is up 160% since March 2003, says Robert Orr, also in the FT.

And the "takeover-friendly" mid-cap market has risen more than 30% in the last six months about double the returns from the FTSE 100. The 250 is now trading 40% above the levels of the dotcom boom, while the main market is yet to get back to its 2000 level. That could be unsustainable, says Orr. "Evidence is emerging that valuations are becoming overstretched."

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Annunziata Rees-Mogg

Annunziata was a deputy editor at MoneyWeek, covering financial markets, politics, economics and comment pieces. She then went on to the Daily Telegraph as a lead writer where she wrote a column on young women’s financial issues. She was briefly a member of the European Parliament for the East Midlands region in the UK as part of the Conservative Party.  Annunziata continues to write  as a freelance journalist.