UK Equity market at 5 year high

Unless you are a professional investor, you may be wondering why UK equities are strong in a weak economic environment and the Footsie has breached the 6,500 level for the first time in 5 years.

Markets are very fickle and can obsess with economic situations for many months, ignoring positive information when selling and at the moment the equity markets are tending to ignore any negative news when buying.

Take the Eurozone for example. If a year ago, or less, one of the senior members, Italy, had an election where no clear party was elected , this could have easily produced a run on global equities, not just european. However, there is more comfort around that the Eurozone crisis is under some kind of control so this hasn't happened. The economic situation in Greece hasn't changed that much but it is out of the spotlight for now. 

Most of the current gains are based more around the US recovery than anything happening in Europe and the Footsie has been dragged up on the coat tails of the American stockmarket. This is despite the UK credit downgrading, poor growth scenario and prospects. 

While equities ride the current surge into stocks and shares, the buying enthusiasm stops with the pound, that had some form of safe haven status in the middle of the Eurozone crisis, when UK bonds were attractive to investors but is now weak and may stay that way for some time, more reflective of UK economic conditions than the stockmarket.