Record Low Pound Boosts FTSE 100

Record Low Pound Boosts FTSE 100.

The £ fell yet again today to a 30 year record low against the $ at $1.27 to the £.

This sent FTSE 100 soaring to over 7,100 with a record high predicted today.

Why is FTSE 100 going up?

The simple answer is many of the FTSE 100 listed companies do most of their business outside the UK.  This means that if they are making profit in $ or € or most other currencies, their foreign earnings when reported/repatriated back to the UK and converted from dollar/euro to sterling, are buying more £ i.e. a greater profit margin.

Comment

To quote Warren Buffet: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”.  There is a lot of greed out there today and given so many negative headlines, we can see no reason to buy back in to UK equities at such a high point.  It is interesting when you look at the FTSE 250 or FTSE All Share indices, which have a greater proportion of UK facing trading business i.e. business is done in the UK and not so much overseas, that markets, whilst up, are not anywhere as ‘bullish’ as the FTSE 100.

If you were brave and decided to stay in FTSE 100 tracker funds, perhaps now is the time to lock in those gains.  The US is heading towards election and potential interest rate increases.  This will drive markets down across the globe.