The resilience of the FTSE 100(INDEXFTSE: UKX) has no doubt taken even the most optimistic stock picker by surprise.
It seems a lifetime ago since Britain's premier index slumped to its cheapest since 2012 around the 5,500 marker. But it was just a matter of months and the Footsie was last dealing well above 6,100 points. However, the extreme jitters that saw investors head for the door in February are just as relevant now, leaving plenty of room for a fresh move lower in my opinion.
Hold onto your hats
Indeed, concerns over global economic cooling have picked up the pace since then. Just yesterday the Confederation of British Industry (or CBI) cut its UK growth forecasts for 2016 and 2017, from 2.3% and 2.1%, respectively, to just 2%
The CBI warned that "a dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum which is chilling some firms' plans to invest."
A legion of business leaders have lined up to warn over the implications of a 'Brexit' decision at June's vote, leading many to predict a calamitous stock market slump should voters choose to tumble out of the EU.
And of course there's plenty of mud elsewhere to affect the outlook of Britain's blue chip multinationals.
A stream of disappointing data out of China during the past month -- such as slumping imports and falling money supply -- has increased concerns over the entire Asia Pacific region. And news last week that the US jobless rate has hit 14-month highs has fed speculation that economic growth across the Atlantic is running out of steam too.
There are plenty of stocks across the FTSE 100 that look chronically overvalued, in my opinion, particularly across the commodities sector where chronic supply/demand balances persist. Indeed, I reckon the index's huge weighting towards this battered segment in particular exacerbates the chances of a significant retracement.
Diversified producer BHP Billiton, for example, is trading on a huge forward P/E rating of 74.3 times, sailing above the benchmark of 15 times that indicates reasonable value. And fossil fuel giant BP is dealing on a bloated reading of 30.2 times.
Frenzied buying activity has also left other stocks with massive structural problems like Tesco dealing at unjustifiable premiums -- the supermarket recently boasted a forward earnings multiple of 24.1 times.
Still, there are plenty of stocks out there with terrific long-term earnings potential regardless of current macroeconomic volatility.
Rampant buyer demand, combined with a chronic homes shortage, should continue propelling earnings at housebuilders like Persimmon and Barratt Developments higher, in my opinion.
Meanwhile, household goods manufacturers Reckitt Benckiser and Unilever -- not to mention drinks giant Diageo and tobacco play Imperial Brands -- carry terrific brand power than should help them navigate the worst of declining economic conditions.
I believe the next few months could see many top-quality stocks such as these going for a song, leaving plenty of opportunity for eagle-eyed investors.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended BP, Diageo, and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.