For Britain’s megacap stocks, the post-Brexit pound is a gift that keeps on giving.Rob Hill/Getty Images/iStockphoto
For Britain's megacap stocks, the post-Brexit pound is a gift that keeps on giving.
The FTSE 100 index has closed at a record every session since British markets reopened after Christmas – that's nine trading days – marking a record streak of consecutive all-time highs. Coming on the heels of its best annual performance relative to the Stoxx Europe 600 index in three decades, the FTSE 100 has climbed 1.9 per cent in 2017 as a further slump in sterling boosted its exporters and commodity producers rallied.
"It's been an unbelievable start to the year – the U.K. economy is looking fine and additional sterling weakness continues to improve the outlook for corporate earnings," said Yogi Dewan, who oversees about $1-billion (U.S.) as the chief executive officer of Hassium Asset Management in Gerrards Cross, England. "FTSE 100 CEOs must be high-fiving each other. But I would say the market is getting overbought now and it's time to be a little more cautious."
Better-than-expected economic data – including the country's strongest manufacturing output since 2014 and a surprisingly strong end to the year for housing prices – has also helped lift sentiment for stocks that were lagging following the Brexit vote. That propelled the FTSE 250 index of mid-caps to an all-time high on Monday. The FTSE 100 climbed 0.5 per cent on Tuesday, as miners gained and better-than-forecast sales at Wm Morrison Supermarkets PLC lifted shares of grocers.
While some strategists are saying it's time to sell, European-listed funds tracking the FTSE 100 have continued to attract money this month. Analysts have upgraded their profit forecasts for the benchmark's members, predicting a 25-per-cent gain this year, and member valuations on an estimated earnings basis remain below its three-year average.
The gauge's relative strength index has been above 70 since it began its current winning streak in what technical analysts call overbought territory. A pullback below that threshold could signal more declines.
Despite recent gains, there's little evidence from options data of traders rushing to protect against future losses in the FTSE 100. It remains to be seen if British bulls hold out as long as their German counterparts did two years ago, sending the DAX index to 27 fresh records in the first four months of 2015.