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FTSE 100 hits a 15 month high

While many investors are concerned that the UK stock market is pushing to levels not seen since the Lehman Bros collapse, there is renewed vigour in the markets today with a rise of 35 points in early afternoon trading. However, does the economic environment and prospects for the UK economy really justify a move back to such levels?

One factor which many people often ignore is that the UK stock market is "believed" to look forward at least nine months so in effect we are now looking towards September 2010. If you believe this particular train of thought then it would look as if the UK economy should be in a better situation in nine months time than it is at the moment. However, this is not the view held by all economic experts in the UK and indeed the Bank of England has recently become a little more negative on the immediate outlook for the UK economy.

It is worth remembering that VAT will move back to its traditional 17.5% level after the concessionary rate of 15%. The quantitative easing program cannot go on forever, UK unemployment may not yet have peaked and disposable incomes will come under pressure in 2010. Each investor needs to decide whether in their belief the UK economy justifies the current level of FTSE 100.

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