FTSE100 - Best start to the year since 1999

Reading this morning that the start to this year is the best for the FTSE100 since 1999 makes me feel that this new found bullishness in the market could be a two edged sword. On the one hand it looks like shares are being seen in a more positive light, on the other the move up since early December does look a little stretched and might be getting ahead of itself. It could quite easily suck people in here as the fear of being left behind takes hold. Then just as you buy, the correction comes. The trouble is, waiting for pullbacks which often never come or are never as bad as you might hope for, are often themselves a two edged sword, you never quite get the price you were hoping for and curse all the times you missed getting in. The market has a habit of leaving you behind, there are no easy answers

First some figures.

At close on Friday the FTSE is up for this year by 3.8%.

The FTSE All World index is at its highest level since May 2011.

Money flowing into equities is the highest for 5 years. Flows into equity funds were £13.8 billion in the week up to Jan 9th, the highest since September 2007.

World markets have also been enjoying an early new year rally, the S&P reached a 5 year high last week. Emerging markets took a lot of the new money mentioned above.

Already there is talk that the risk play is back on, away from the more safer investments and trades.  If so, this may be good news for more risky shares, especially in commodities, energy, mining, etc. If the money feels that emerging markets are the place to be then that is usually bullish for companies that sell and have their business in those markets. This may however be a false dawn, the euphoria of a Fiscal Cliff part deal still having its effect on markets. Soon, politicians will get back to talking about spending cuts and debt reduction, volatility and a move to the downside could then return, especially if as usual everything goes to the wire.

Source; http://www.investmentweek.co.uk/investment-week/news/2235961/ftse-enjoys-best-year-start-since-1999