Columnist

‘NO’ Vote to be Catalyst for FTSE breaking 7000

A ‘No’ vote in the Scottish Referendum could be the catalyst for a strong market rally that will see the FTSE 100 Index push through the elusive 7000 level, according to the leading financial adviser in the North- East.

‎Markets hate indecision and once the referendum is out of the way, the FTSE should benefit. A no vote will still see Scotland gain new powers promised by UK leaders and it will also be a win for the UK which retains its Union. So both sides should be claiming victory for democracy and I believe the market will reflect this.

Conclusion of the chapter will be positive for UK equities, not least because many constituents of the FTSE have their head offices north of the border. Some of the major ones are financial stocks, important constituents of the FTSE 100 index.

The FTSE 100 reached a high of 6930 at the peak of the tech boom, on Millennium eve, and it hasn’t been near, let alone near the 7000 level, since. So how could the end of the Scottish referendum push it closer?

The pound has shown weakness over recent months, impacted by the uncertainty around the referendum. A conclusion could cause it to strengthen and the value of investments held in Sterling to increase and this alone would be positive for UK equity markets.

The Scottish referendum has also been clouding the future of interest rates. This has been shown in the votes in the latest Monetary Policy Committee meeting to decide whether the first rise was due. Analysts correctly predicted the 7-2 split to be maintained this month in part due to the uncertainty over the Scottish referendum clouding the UK’s economic future.

The possibility for rates to rise sooner when the future seems more certain is clear. So along with rates, savings rates will also be expected to rise. This is positive for the economy, equities and equity investors. Aside from political factors, the UK stock market is from a fundamental perspective looking attractive. It does not look overvalued and yields are attractive compared to other stock markets and current yields on savings accounts.

This does not mean it will be halcyon days, as after the initial impact of the ending of uncertainty over Scotland, subsequent market rises are bound to be interspersed with shocks. One thing is certain, even for those who know that they don’t know when it comes to stock market predictions, there is a very strong possibility of the FTSE entering a new bull run. Only time will tell if the conclusion of the referendum is a big enough catalyst to push it on, but it certainly seems like it could be.

Ian Lowes, Managing Director, Lowes Financial Management

This was posted in Bdaily's Members' News section by Ian Lowes .