Laith Khalaf, senior analyst at Hargreaves Lansdown, says Yes.
The FTSE is currently trading below its long-term average compared to company profits, but that doesn’t mean it won’t go further into deficit.
Markets are fickle beasts over the short term, and there’s no telling how long, or deep, the current bout of risk aversion will be.
There’s certainly no shortage of worries: the Eurozone flirting with deflation, conflict in the Middle East, and the end of QE in the US. These concerns won’t disappear overnight.
History tells us that stock prices can deviate from company fundamentals for prolonged periods, reflecting both irrational exuberance and excessive despair. So we should not expect the FTSE to snap straight back just because it looks undervalued.
But markets ultimately reflect company earnings. In the short term, these could come under pressure if global growth disappoints.
For longer-term investors, however, stocks still look like the best bet, no matter which way the FTSE heads in the coming months.
Rebecca O’Keeffe, head of investment at Interactive Investor, says No.
The recent pull-back in equities has seen sentiment shift from greed to fear.
But with central banks and politicians keen to do whatever it takes to support economic growth, it’s unlikely that things will get substantially worse.
The US remains a key driver for markets, and the Fed will not do anything to jeopardise its recovery, providing the foundations for positive markets.
Bank of England governor Mark Carney is acutely aware of how sensitive investors are to any prospective rate rise, and is likely to tread a cautious path.
Chinese policymakers will be keen to meet their 7.5 per cent growth target, and are likely to provide additional stimulus measures to do so.
Even in Europe, where the threats of deflation and recession are present, the ECB is stepping up to the challenge.
Although there are significant market risks, they are being managed well. With markets awash with cash, investors may soon begin to see current equity valuations as an opportunity rather than a threat.