FTSE-100 is full

In 5 weeks time, the corporate tax rate in the U.K. will rise from 19% to 25%.

Don’t be too surprised.

Corporate taxes were as good as they were going to get.

They were 52% from 1973 onwards….then the chart below shows the rest.

Add a doubling of the cost of capital (net interest expense)…..

and my note about changes (risk) to EBIT is pertinent.

And so, I’ll throw an additional study being a Monthly price chart.

It shows the FTSE 100 now trading up towards a rare 2.5 standard deviation (above its rolling monthly mean) and its 14% above its 50 month moving average. The latter means something too.

It’s difficult to make an emphatic case for an extension to the current bull run.

Moreover, should it run higher, at least acknowledge that the probability suggests that it’s an advance to ‘rent’ rather than ‘own’.

For institutional investors, I’d be interested to know if the ‘goliath’ asset consultants are identifying the same extreme in their allocation advice.

February 23, 2023

by Rob Zdravevski


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