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Top fund manager likens Trump market rally to dotcom bubble www.theguardian.com
Britain’s best known fund manager has likened the current stock market euphoria to the dotcom bubble, even as the FTSE 100 closed at yet another record high.
After a volatile day’s trading, the leading index finished 1.88 points higher at 7292.37, marking the 11th consecutive day of record closes and the market’s 13th successive daily rise.
But Neil Woodford, who admitted his own fund’s performance in 2016 was disappointing, said the current situation reminded him of the technology bubble which reached a peak on the last day of 1999 and then burst dramatically.
He said : “There was a period then when fundamentals didn’t matter at all and markets just became completely momentum-orientated. There was no price that people wouldn’t pay to be positioned in technology stocks and no price that they wouldn’t sell shares that were focused on the old economy.
“And in a similar sort of way – maybe not to the same extreme, but in a similar way, we have seen 2016 play out like that. Valuation has become significantly less important. Indeed, arguably irrelevant in this sort of post-Trump period. Momentum has driven the share prices, not fundamentals.”
The FTSE 100 has been boosted by a fall in sterling since the Brexit vote, which has helped those companies which make most of their earnings overseas and has also made UK businesses cheaper for overseas investors.
An early rise in the pound on Thursday, as the dollar weakened, sent the index lower in early trading. The slump in the greenback, which pushed the pound up nearly 1% to $1.2316, followed disappointment that US president-elect Donald Trump had not given details of his proposed spending and tax plans to boost the economy at Wednesday’s press conference.
Pharmaceutical companies, hit by renewed threats by Trump to cut the prices they charge for their drugs, were among the losers, while Christmas trading statements from UK retailers proved a mixed bag.
But sterling lost its gains as the day progressed and was marginally lower at £1.221 by the time the London stock market closed, helping the leading index edge to its new peak.
In the US, the disappointment with Trump’s press conference performance and the lack of economic news from the president-elect sent the Dow Jones Industrial Average down 152 points to 19,802 by lunchtime. On Friday, it had come within one point of breaching the elusive 20,000 barrier.
Chris Beauchamp, chief market analyst at IG, said: “The apparent demise of the rally is being blamed on disappointment following the president-elect’s press conference, but in reality the surge was already running on air, with US markets in particular having essentially gone nowhere since mid-December. This fact was masked by the ongoing hope of Dow 20,000, but it looks like this has been scrubbed from the timetable for the next few weeks.”
In the eurozone, a stronger euro saw Germany’s Dax drop 1% and France’s Cac close down 0.5% with exporters among the leading fallers.
Published Date:2017-01-13
