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On 22 March, the FTSE 100 touched 7,961 factors, simply shy of 8,000. It briefly broke that stage in early 2023, however simply couldn’t hold on.
Can it climb by means of 8,000 factors once more quickly, after which keep there? I’d say the possibilities of which are rising, for a lot of causes.
Cheery outlook
The important thing one is enhancing investor sentiment.
Russ Mould, funding director at investing agency AJ Bell, stated that “every part has centred round central financial institution rate of interest choices and whereas the US and UK saved their charges stage, it’s all about what might occur subsequent, and confidence is rising that we’ll see fee cuts quickly“.
He added that “danger urge for food is growing; corporates are slowly changing into extra upbeat and persons are creating wealth“.
And that must be good for inventory markets, proper?
Earnings rising
Nicely, we want two issues for that. In addition to a constructive outlook from buyers, we want some sound fundamentals to again up the optimism. And I believe that’s been enhancing for a while.
Forecasts counsel that complete pre-tax profit from the FTSE 100 ought to break £250bn in 2024, and head even increased in 2025. Again in 2018, when the FTSE 100 was getting shut to eight,000 factors and earlier than Covid put the boot in, that determine was under £200bn.
I’m additionally seeing a stream of outcomes that present robust money technology. We’re getting robust dividends, and new share buybacks.
Large dividend
For example, let’s have a look at Phoenix Group Holdings (LSE: PHNX).
The inventory had been on an enormous forecast dividend yield of round 11%. So why weren’t buyers shopping for the shares, pushing the share worth up, and forcing the yield down?
I believe the 2 key issues we lacking for this one. Sentiment had been glum. And we didn’t actually have the proof to help upbeat broker forecasts.
Prime outcomes
Then we obtained FY outcomes, the agency introduced a progressive dividend coverage, and all of a sudden the yield appears to be like extra sensible. And the share worth jumped on the day.
It’s nonetheless in a dangerous cyclical sector, and the insurance coverage enterprise faces new rules. And Phoenix inventory may even be totally valued. But it surely’s an instance of the shift that I see occurring.
The remainder of 2024
Hypothesis is rising that we might see as much as 4 rate of interest cuts from the Financial institution of England by the top of the yr. And we would even see the primary as early as Could.
In the event that they occur, they’ll most likely be 1 / 4 of some extent at a time. However that might carry the bottom fee all the way down to 4.25%. And that ought to shift the attraction again in direction of shares once more.
I believe we might nonetheless see a shaky first half this yr. And all this speak of Footsie ranges shouldn’t drive our investing selections anyway. For that, precise valuations and dividends from the businesses themselves are all I care about.
However, only for enjoyable, I’ll put my guess on the FTSE 100 reaching 8,500 factors by the top of the yr.
