The FTSE 100 index is gaining momentum and is on track to beat its previous record closing high of 8,014 points, set in February 2023. Today, the index has surged by as much as 1.8%, reaching over 8,040 points. The strong performance of miners on the commodity-heavy index, as well as the FTSE 250, has contributed to the rally. Tin prices have reached their highest level in two and a half years, while nickel prices have reached seven-month highs. The falling value of the pound has also played a role in boosting the FTSE 100. Over the past three days, the pound has dropped more than 1% against the dollar, falling towards $1.23 for the first time since November. This drop is attributed to indications that US interest rates will remain high for a longer period than previously anticipated [f7326872].
Analysts believe that the recent momentum of the FTSE 100 is largely due to a rising tide lifting all boats, as global indices have also seen gains. The FTSE 100 has gained roughly 9.4% since the start of 2024, reaching 8,479 points last week. Improved GDP projections, inflation heading back to target, and solid corporate earnings data have attracted interest in the FTSE 100. The Bank of England is expected to hike interest rates this summer. However, there are factors that could derail the progress of the FTSE 100, such as further upside surprises to US inflation, a deterioration in the US economy, geopolitical factors, upside surprises to UK inflation, downside surprises to UK growth, extreme weakening of raw material prices, and the threat of a hung parliament after the upcoming general election. Analysts believe it is within the realm of possibility for the FTSE 100 to hit 9,000 this year, but achieving 10,000 would mark the best year for the index since 2009 [e2c00f67].
According to a report by the Economy Forecast Agency, the FTSE 100 could reach as high as 9,907 points by December, and potentially break the 10,000 point threshold for the first time in history by as early as February 2025. The report suggests that upcoming interest rate cuts could provide a catalyst for share price growth, especially for stocks trading at relatively cheap valuations. However, investors should approach these forecasts with caution, as they are based on assumptions. The most optimistic forecast is 10,000 points, while the least is 8,854 points. The report also recommends considering buying companies that are already delivering strong results, such as Compass Group, which has seen double-digit sales and earnings growth and near-pre-pandemic levels of profitability [65cd55ea].