FTSE 100: Positioning for Long Term

By: Richard_Cox

Over the last year, the FTSE 100 has come under pressure as investors have taken profits and we are seeing increased speculation that the economic will be able to withstand future increases in interest rates.  This has created some interesting opportunities to buy in at very cheap levels as valuations in equities are still trading near the lows for the period.  Bullish positions in the FTSE 100 represent something of a contrarian view in the current environment but from a risk/reward perspective this view is clearly favorable.

Chart View:  FTSE 100

In the FTSE 100 chart above, we can see that prices have bounced from important support levels near 5600 and the series of higher lows that has posted since then suggests that we are in the midst of a short-term rally.  But when we view things in broader terms, we can see that markets are still well below the highs from last April.  This creates strong potential for topside moves if the current momentum takes hold. 

This technical view is supported by the fundamental side, as well.  Corporate earnings have shown consistent improvement over the last few quarters and this supports the stance that stocks can continue moving higher even if we see changes in interest rate policy at the Bank of England.  This is not something that can be said for all geographical regions, so this is a factor that should support stocks in the FTSE 100 into the second half of this year.

Conservative Positioning in Stocks

With all of this in mind, it is looking like the current activity in the FTSE 100 represents a buying opportunity.  Long-term investors should be looking for these types of situations as a means for entering in at lower levels on the basis that economic data is strengthening at rates similar to what is being seen in corporate earnings figures.  These are the main considerations that should be undertaken when constructing a central outlook in equities.

In addition to this, investors should be looking for brokers that offer innovative ways of reducing fees on opened positions.  "An investor needs to consider not only the fees a provider charges but also the price of the stock they are buying or selling and the technology their provider has to deliver them a comprehensive and cost efficient service," according to UK broker Degiro.   This is an important factor for long-term investors to remember because this can be one of the most impactful methods for maximizing potential for profits versus losses.

By Richard Cox

© 2016 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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