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Why is the stock market going crazy and should I go in?

roller coaster, stock market, investmentYou probably didn’t notice that, in between getting back to school and clearing up after Christmas, the stock market has been soaring. In fact, it’s hit all-time highs over record-breaking periods.
This is great news for anyone saving into shares: the value of your pension and/or investments has gone up – on paper at least, quids in! But for those who are yet to commit cash, is it the right moment to take the plunge?

It’s worth understanding what’s fuelling (literally) the recent rises. The price of oil has been in the doldrums for a couple of years but has started to strengthen. This has helped the share price of big companies which dominate the stock market and can influence its direction, in this case upwards.

Then there’s Brexit. Worries about Britain leaving Europe have sunk the pound against other world currencies. And while my holiday to Florida in April is now hideously expensive, as opposed to just pricey, those UK firms selling goods abroad have been able to offer customers a lovely discount at no cost to themselves.

So will it last? You’d hope that the share price of a company goes up because it’s doing stuff cost-effectively which lots of people want to buy – not because of something flimsy like currency movements.The recent ‘winning streak’ seems to have been based on fluff rather than hard figures which leads me to be cautious. Especially as said streak ended yesterday on worries about exactly what Theresa May is proposing for our EU exit. 

On that basis, piling a load of cash into shares right now seems foolhardy. In fact, it could be a good time to sell - when prices are high. But then there’s the problem of putting the proceeds somewhere else. The usual suspects – bonds and cash – aren’t looking as attractive right now. And who knows, even without good reason, this could be the start of a long run up for shares.

Personally, I’m keeping going with my monthly plan, dripping small amounts into shares so I can keep saving but not bet a massive lump sum just before a crash. I’m also sticking with mainstream companies. Mr Minted, on the other hand, has stopped putting money into shares altogether and is checking out property. So may the best investor win – but we’ll be holding on tight. Looks like it’s going to be a rollercoaster ride!

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Monday, 10 December 2018