Britain’s blue-chip index may have started the year by reaching a succession of highs - six record closes mark its longest winning streak in two decades - but how solid are those gains?
In 2016, the FTSE 100 ended the first week in January on 5,912 points, in the first week of this year it scaled to 7,208 points - a rise of 22pc.
While many investors will see the record levels as reason to rejoice, the underlying causes are not so cheering.
The fall in sterling is particularly significant: around 70pc of FTSE 100 companies’ earnings are made overseas and any fall in the pound makes them more valuable in sterling terms.
During 2016 the FTSE 100 rose by more than 19pc. However, in US dollar terms – stripping out the positive impact of sterling’s fall – the index actually fell, by 0.2pc.
The rise of the index in 2016 also hides enormous divergence. Looking at the index sector by sector shows that there were some large risers and some steady fallers.
Oil and gas producers rose by 61pc last year, while the FTSE 350 mining index rose by 100pc. Basic materials, which includes the mining and refining of metals, chemical producers and forestry products, rose by 90pc, while the construction and materials industry rose by 49pc.
On the other hand, retailers fell by nearly 14pc, while the telecoms sector was down 12pc and food producers lost 9pc. Real estate was hit the hardest, falling by 32pc in the year.
Jason Hollands from Tilney Bestinvest, the fund shop, said: “Currency moves rescued markets for UK investors last year. If you were cautious a year ago, with concerns about the uncertain geopolitical outlook, then this year has similar warnings.”
He pointed to a “marathon” of European elections and the potential unpredictability of Donald Trump’s presidency.
Chris Wyllie, chief investment officer at Connor Broadley, the wealth management firm, said he did not have concerns about the valuations of British companies but advised investors to be discerning and to “buy the dips”.
“There are going to be some bloodbath sectors for medium-sized firms, retail being one. More businesses will be going to the wall,” he said.
Mr Wyllie pointed to the example of Next, which this week issued a profit warning after slower Christmas sales, and said: “If Next is feeling it, what are the less good businesses out there going to be doing?”
However, investors also need to separate the fortunes of the FTSE 100 index from their feelings about the domestic economy.
“The UK stock market is not that reflective of the UK economy. Investors’ view on the UK economy is not a particularly positive one,” said Mike Bell, global market strategist at JP Morgan Asset Management.
There are some big question marks hanging over Britain in 2017, said Tom Stevenson from Fidelity, the asset manager. The first is domestic earnings.
“Economic growth in the UK is probably going to slow down significantly because inflation is likely to rise and that means real consumer purchasing power is going to diminish,” he said.
Inflation will hit the price of any goods imported, hurting UK consumers' pockets, said Ben Yearsley, investment director at Wealth Club, an investment service.
"UK inflation is still relatively benign with retail prices index running at 2.2pc. As we import many goods into the UK, the depreciation in sterling will start pushing the costs of goods we import up, thus forcing inflation up.
"It wouldn't surprise me to see inflation of 3-4pc later this year, which will put a squeeze on consumer spending. Normally the Bank of England would raise rates to combat inflation, but this might not happen this time," he said.
The other big risk to British shares is Brexit and the associated uncertainty. Mr Bell said the fall in sterling had priced in a “hard Brexit” that might not materialise.
“If so, sterling will rally and that could reverse some of the gains that we have seen as a result of its fall,” he said.