The UK Index has been rallying hard, flirting with fresh record highs, on the combined benefit of high oil prices and a weaker GBP, lifting the spirits (and investment accounts) of many bullishly-minded investors

Have we gone too fast, too far? Does anyone out there honestly think that the current market rally is unstoppable and that we are not, at the very least, in for a correction, if not a painful leg lower into an Autumn downtrend?

Think about all the things that can go wrong between today and the end of the year. Brexit talks blowing up because UK Government can’t find compromise on Northern Ireland, oil tumbling from current highs because Trump orders Strategic Petroleum Reserve uncorked, or something unspeakably horrible happening over in North Korea. Preparing yourself for potential UK Index fall is not just alarmist thinking, it’s prudent risk management.

While everyone is busy buying, right now could be the best time to start thinking ahead and considering which short positions you can take, which companies and sectors are most vulnerable.

First, there are the perennial stock market disappointments, the Centricas, BTs and Carpetrights of this world, companies whose business model is either failing or just not exciting enough for investors. These stocks have been in a long-term negative momentum that is not going to stop any time soon. No shame in profiting from their misery, if they can’t get their own house in order.

Secondly, there are stocks that have been doing reasonably well recently, but are vulnerable to global turmoil or changing economic environment (FX rates, bad weather, political instability, legal pressure, you name it). Companies like UK Index Miners (BLT, RIO) or Energy (RDSB, BP) may seem like unassailable winners today, but do you think they will do just as well if oil prices tumble or if USD fell against the Pound?

Today, you can benefit from their success, tomorrow – from their failure. All UK Index Miners seemed like a sure-fire Long Play just yesterday, but today Glencore shares are falling like a rock (-6.5% in mid-day trading) because of news of a bribery investigation over its dealings in Congo. Now you wish you were Short GLEN, don’t you?

Of course, you can’t always predict surprise events like that, but there are short-side trends out there that you can anticipate. But to get in on the action early, you need expert research support that will help you identify economic trends and important corporate announcement straight from the wires.

If you are interested in protecting your investments before potential UK Index fall, you can sign up here to get our research delivered directly to your inbox.

Suni Dhanjal, Senior Trader, 18 May 2018