U.K.’s FTSE Reaches All-Time High But It’s Still Cheap

The U.K. market is cheap even as it makes all-time highs. After the pension fund bailout this autumn, up has shot the market. It is easy to put this down solely to the U.K., but up has flown markets all over the world.

What was breaking the equity markets was a runaway dollar and that was reined in much for the reason to avoid the sort of meltdown that almost occurred in the U.K. on a broader front. Systemic meltdowns do long-term damage and central banks are simply interested in avoiding them as first order of play and then things like inflation and employment next. This wasn’t always the case, but it is now because it is sudden runaway contagion that wrecks economies rather than kicking the can. Now it is a fair bet to imagine that central banks will fail at the game and a downfall will follow. It’s a theme of many doom-scrolling market sites, but so far the central banks have done a solid job since the 2007-2008 crash.

It doesn’t explain why suddenly the U.K. FTSE 100 is off to the races but the likely story is, institutions have been bailed out and now can rotate out of bonds into equities to avoid the negative impact on their bond-based capital from rising bond yields.

This is the FTSE chart:

You can draw all sorts of bullish scenarios from here if you are a bull.

Here is another observation from the end of January:

For me I am following this rally with about 25% of my portfolio, because I remain a bear even as the market in both equities and crypto is making a pretty good bullish fist of it.

So here is the opportunity in addition to buy and hold etc., there have simply been very few takeovers in the U.K. market since Covid. I’m guessing this is because while there might be plenty of cheap money about and U.K. shares remain at incredibly low valuations, no one wanted to hop on a plane to do deals or receive those that had. (Just a plausible theory.)

Anyway at some point that situation will end and I have a feeling that there is M&A dust on the horizon and the distant thundering of hooves. For instance, even while little if anything has happened Vodafone, ITV and BT are all in the frame for M&A and with U.S. valuation 2-4 times higher, why wouldn’t Ragnarök begin?

Get your cheap U.K. PLC while stocks last at these one-time only prices.

This is going to be my positioning, rather than a general “the bull is back” tack.