It’s been a lively week for the UK’s blue chip index and for investors that closely follow UK macroeconomic data. A hawkish barrage from European central bankers and a significant record being broken by UK household debt levels have set markets alight, but what might it mean for your investments?

This week’s prevailing story has been the wave of central bankers from across the world seeming to all 

sing from the same hawkish hymn sheet, proposing an end to the era of cheap money and low interest rates. This marks a striking turn, especially from the Bank of England Governor Carney and European Central Bank President Draghi, whom after years of dovishness look to be preparing investors for a change in policy direction in the near future.

Signs that this could be the case have been been quietly emerging. Earlier this month, the Bank of England saw the most policymakers vote for a rate hike since June 2011, with the ‘nay’s narrowly defeating them by a 5-3 vote. Analysts from Nomura are even expecting the BoE to raise interest rates as early as August – will the move come that soon? What could this mean for the UK 100 ?

During 2017, the UK’s blue-chip index has gone from strength to strength, weathering political storms, terror attacks and a rebounding pound. However, this week’s mini ‘taper tantrum’ may have exposed a chink in the UK Index ‘s armour, while macroeconomic data released today could pose an even greater threat.

While 2% GDP was in-line with estimates, Household Savings were confirmed at their lowest level against Household Debt since record began 54 years ago. If interest rates do indeed rise, this could mean that households struggle to meet their debt payments.

How might banks, financials and consumer stocks react? Could we see defaults that lead to another market crash?

The UK 100 index is currently trading at an 7-week low, having broken back below support at 7380 for the first time since mid-May. Thursday saw the biggest one day swing on the index since the middle of April. Could this be the start of a much bigger move?

And what would happen to your investments if the UK Index was to fall much more sharply, by 5, 10 or even 20%? Are you ready should the move downwards continue?

You don’t have to be unprepared. There’s a range of ways that you can be primed for a falling market.

First, having the option to go short as well as long when the market is falling allows you to profit from market movements in either direction.

Second, you could utilise shorting alongside a range of other measures in order to actively hedge yourself against potential losses – whether you are net long or short. Taking a corresponding position relative to your current holdings – for example by opening a long or short position in a sector peer of a current holding – could help to minimise potential impact on your portfolio.

Finally, in a falling market you need to have the ability to instantly execute trades, whether you are going long or short. Having to wait while your trade clears could cost you significantly, either extending potential losses or eating into your profits.

Here at Accendo Markets, we provide you all of the above facilities, as well as a plethora of other services. Alongside the personal broker services that have seen us win Best CFD Provider at the City of London Wealth Management Awards for nine straight years, our clients have access to specifically tailored research that helps them make sense of a range of financial markets. You can try it out yourself by signing up here to have our full research offering delivered directly to your inbox.

Tom Soanes, Trader, 30 June