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Final week the blue-chip FTSE 100 index hit a brand new all-time excessive.
That can little question have had many traders cheering. However others could also be questioning whether or not it means the index is now overpriced and so primed for a tumble.
Right here is my take — and what it means for my portfolio.
A lot of market uncertainty proper now
Simply as delight comes earlier than a fall, a increase can come earlier than a inventory market crash.
Nonetheless, that increase can final for years and even many years, with report after report doubtlessly being set alongside the best way.
So, a FTSE 100 report doesn’t essentially point out that we’re on the prime of the market, or even perhaps wherever close to it.
That stated, the present geopolitical and financial setting is leading to loads of market uncertainty in London and elsewhere.
Issues may go both manner from right here
In sensible funding phrases, which means it’s potential that the blue-chip index may maintain transferring upwards from right here.
As poor performers threat getting relegated from it whereas fast-growing companies take their place, I do suppose the index isn’t an excellent proxy for the market total. Certainly, over the previous 5 years the FTSE 100 has moved up 15% whereas the FTSE 250 has fallen 4%.
I feel the blue-chip index would possibly maintain going up and the latest excessive suggests substantial confidence amongst not less than some traders. Nonetheless, I additionally worry that gradual progress and financial uncertainty may imply that eventually we see a pointy reversal.
I’m largely ignoring the index
That may matter to me extra if I used to be investing within the FTSE 100 total.
As a substitute, I favor to spend money on particular person shares. So the actions of the index as such should not that top on my radar.
Nonetheless, may not a excessive FTSE 100 value imply that particular person shares are poor worth?
In observe, not essentially.
Inside these 100 shares, at any given second some might look overpriced to me however others may look undervalued. Certainly, that’s how I see it in the mean time.
An instance is a share I’ve been shopping for extra of in 2025, after it has fallen 10% because the begin of the yr: JD Sports activities (LSE: JD).
It’s 49% decrease now than it was 5 years in the past. The sportswear retailer has clearly misplaced loads of its shine within the Metropolis. It not has the large money pile it used to. And it has issued a number of revenue warnings and including lots of of latest outlets annually is consuming into earnings.
However I additionally suppose that retailer opening programme may assist gasoline additional progress. The massive US acquisition that used up a lot of that huge money pile may too.
Even after the revenue warnings, JD nonetheless expects to ship revenue earlier than tax and adjusting gadgets of £915—£935m. That makes its market capitalisation of £4.4bn look low cost to me.
