FTSE 100 at two-month high and flying

Decent economic data has kept records tumbling on Wall Street, and who’s to say this run will unwind any time soon. Overnight, it was talk that Donald Trump could name Fed governor and market’s choice Jerome Powell as Fed chair Janet Yellen’s replacement that drove sentiment.

Winning streaks like this are always difficult for investors, as the head keeps asking how much higher? It requires calm and nerve to hold stocks in these situations, even more to continue buying.

Valuations are toppy in areas of the market both in the US and over here, but history is littered with examples where investors tried to call the market peak and failed. The experts who’ve predicted a crash for more than a year have been wrong, and investors who’d followed their lead will have missed out on substantial profits.

So, there are still plenty of good quality stocks to buy, which are growing profits, pay decent dividends, and have great prospects. That said, corporate America begins reporting third-quarter results in a couple of weeks, and the numbers had better be good, given the size of earnings beats already baked into stock prices.

It’s a big day for ex-dividends in London, among them the third of Next’s 45p special payouts and WPP’s generous interim, which lands highly-paid boss Martin Sorrell another huge windfall.

Even with the impact of ex-divs, the FTSE 100 has significant momentum right now and there’s a great chance it will break above 7,500 soon, putting it within 100 points of a new record. Miners and supermarkets are flavour of the month Thursday.

With little of interest coming out of the European Central Bank’s (ECB) September policy meeting, there was much interest in today’s minutes, with investors keen for clues as to ECB tapering plans or thoughts about how to handle the strong euro.

As it turned out, central bank members admitted concerns about the pace of the euro’s appreciation, and beileved that ongoing economic expansion would strengthen “inflation dynamics”.  

However, they “continued to emphasise that patience, persistence and prudence were still needed, as this process was expected to take time and remained contingent on a very substantial degree of monetary policy accommodation”.

This afternoon there’s a jumble of data out of the US, although the chance of any major upset is slim. Many traders could be tempted to keep their powder dry ahead of tomorrow’s US non-farm payrolls.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.