Sub 5000 FTSE - The Terrible Next Move For The Market?

A Sub-5000 FTSE… The Terrible Next Move For The Market?

Date 29/08/2008

Fleet Street Letter

Theo Casey

The FTSE 100 has plunged from its highs last summer and could soon find itself in bear market territory again. Read on to discover how we at The Fleet Street Letter are preparing...

The 100 top UK companies as listed in the FTSE 100 index are in dangerous territory.

Peter Hargreaves of investment management group Hargreaves Lansdown said the credit crunch is far from over. The chief exec told The Telegraph, "I think there will be a '4' on the front of the FTSE 100 – by the time all the gremlins have been discovered."

Worryingly, Mr Hargreaves is not alone in his bear calls on the market.

Analyst Albert Edwards has been a prominent bear on the outlook for the UK market, as has chart specialist Bill Adlard.

It’s an environment where few investors come out unscathed. How can we look to protect ourselves?

Answer: we diversify. But that doesn’t mean what a lot of investors think it means…

Be active, not passive

It is commonly held that the lowest risk way of buying shares is simply to buy the index.

But investing passively is not the same as minimising risk. Over the past ten years the FTSE has gone sideways. And if the above predictions are right, and it falls below 5,000, buying the index would be a terrible investment.

Minimising risk, or obtaining the most efficient trade-off of risk and reward, is about active, not passive, diversification.

We need to be active stock pickers.

What to buy in a stock pickers’ market

The FTSE 100 is loaded with oil and mining companies. Companies that continue to post record profit hauls despite the credit crunch.

If anything is going to protect us against a sub-5,000 point Footsie, it is these big global giants.

We have to look beyond the UK to protect our pots.

We need companies with diversified operations overseas. Companies that not only earn, but earn in growing economies.

That’s sustainable growth with the potential upside benefit of their currencies gaining against the pound, boosting profits when they’re converted into sterling.

Read our latest report to find out what we’re looking at right now

Best wishes,

Theo Casey
Investment Director
The Fleet Street Letter

P.S. If you enjoyed this article then we encourage you to sign up for The Fleet Street Letter. Get contrarian, cutting-edge analysis for sensible, long-term investments that secure you high growth and healthy dividends.

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