FINANCE COMMENT: Growing geopolitical risks pose a threat to the market's rise

ON FRIDAY the FTSE 100 index of leading shares broke through the 7,000 level for the first time to hit an all-time high of 7,022.51.

David Cameron, Nick Clegg and Ed MilibandGETTY

In Britain, sterling will be turbulent due to the impending election

Although the soaring value of shares is a boon for pension funds and other investors, do not expect it to last.

While I am not predicting that the FTSE will plunge off a cliff next week, I do believe that it is overvalued and will fall back down for a number of reasons.

For a start, the market is being propped up by savers and investors in desperate need of decent returns.

This has been driven by ultra-low interest rates, which will have to return to normal.

When that happens, the money will flow out of shares and send the FTSE down.

Another concern is that the valuations of some companies on the stock market are getting out of touch with reality.

Finally, growing geopolitical risks pose a threat to the market's rise.

Ongoing tensions in the Middle East, combined with the uncertain growth outlook for emerging markets giants Brazil and China will weigh on shares.

Not to mention the small matter of the general election in May.

Earlier this month the FTSE finally breached 6,950.6.

It should be noted that it took 15 years for the index to breach that high, which was set during the dotcom era.

That should serve as a warning.

Investors must not get swept up in the euphoria of the FTSE's rise and allow it to cloud their judgment.

Those who do not learn the lessons of history are doomed to repeat their mistakes.

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