Is the Recent FTSE 100 Bull Run Now Over?

Is the FTSE 100 SAXO BUll RUN OVER? CCAPITAL MARKETS FTSE 100 Value 6.9 - 6.8 - FTSE 6.7 - 6.6 - 6.5- 6.4 - 6.3 - 6.3 - 6.1 - 2012 AUG SEP OCT NOV DEC 2013 FEB MAR APR MAY JUN JUL After a year-long bull run, the FTSE 100 index slid to a five month low on June 20th, 2013 to close at 6,159.50. Is the stock market about to tank? Why the FTSE worries the City Equity markets have been frothy of late. In May, 2013, the FTSE 100 came close to hitting its 1999 peak of 6,950.60. The index fell sharply on the two previous occasions it traded around this level. FTSE FTSE: 6456.9 7- +14.92% 6.5 - FTSE: 6930.2 34.93% FTSE: 5217.4 6 - -24.72% 5.5 - 'FTSE: 6840.3* +15.94% FTSE: 5136 FTSE: 5899.9 FTSE: 5618.8 +38.96% +33.06% +25.51% 4.5 - FTSE: 4476.9 FTSE: 4434.2 4 - -14.19% -31.33% 3.5 - FTSE: 3696 +10.38% 3 - YEAR 1996 1998 2000 2002 2004 2006 2008 2009 2011 2013 *at the peak in May 22nd, 2013. What fuelled the rally? UK Germany US Japan FTSE GROWTH 28.25 % DAX GROWTH 39.67% DOW GROWTH 50.75% NIKKEI GROWTH 49.67% CHANGE IN 10-YEAR GOVERNMENT DEBT YIELD: -161 basis points CHANGE IN 10-YEAR CHANGE IN 10-YEAR CHANGE IN 10-YEAR GOVERNMENT DEBT YIELD: - 118 basis points GOVERNMENT DEBT YIELD: + 9.8 basis points GOVERNMENT DEBT YIELD: - 120 basis points A commitment by central banks to expand their balance sheets has driven investors in search of yield towards risk assets. Over the last three years yields on government debt have generally been falling, while the trend in equity markets has been rising. How do investors value the FTSE? 26.80 25.10 Return on Equity Return on Equity 22.45 21.98 Return on Equity Return on Equity Soap 17.47 Price / Earnings deos 16.66 Price / Earnings SO deos 12.35 Price / Earnings SO 11.28 Price / Earnings 2013 MAY 23 2014 2015 The outlook is uncertain. Compared to government bonds or cash, the return on equity from FTSE 100 stock looks set to rise further over the next two years. In contrast, the index's price-earnings ratio is expected to fall, suggesting lower, not higher, equity returns from here. [ THE ECONOMIST) Pulling the plug on QE 6"There has been nothing that has contributed more to equity market rallies since March 2009 than the Federal Reserve's largesse." Nick Beecroft, Senior Market Analyst at Saxo Capital Markets. The Fed's quantitative easing programme is thought to have heavily contributed to the recent bull run in equity markets. There is a fear that once the Fed pulls the plug the party will come to an end. 85 bn a month [ FEDERAL RESERVE ) SOURCES: The Economist: http://www.economist.com/news/finance-and-economics/21578100-investors-think-equities-are-best-bet-times-expansive-monetary Federal Reserve: http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm Bloomberg Market Data: http://www.bloomberg.com/ This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Services Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA.