UK stocks too high?

UK stocks were at their highest for six weeks on Thursday with Banking and mining stocks leading the way after an early rally on Wall street. The London market closed before the Fed’s interest rate announcement, the mood finished positively – but apprehensively.

According to Reuters some strategists are unconvinced by the upward move and have cautioned investors about reading too much into the market’s recent gains.

The article goes on to say that Anais Faraj, a global strategist at Nomura was not as optimistic. Farai said: We’re going into an earnings season and people are actually surprised at how strong the earnings numbers are looking and that’s triggering a lot of short-covering in the markets but I think, fundamentally, it’s not a clean break on the upside.

Farai further added that: ‘The charts don’t look that encouraging and most of the risk indicators we’re tracking are pointing to more misery. They’re still signalling pretty bearish outlooks.’

Faraj advised investors to sell sectors such as energy, materials stocks and commodities and instead buy into areas such as healthcare, food stocks and tobacco companies during periods of market weakness.

Whilst we’re still neutral on some areas, we certainly agree on his major areas of concern.