Have you seen what’s been happening to the FTSE 100 these past few weeks? Yes, since late October, the UK’s top index has been on the rise.
It got a boost from the latest interest rate decision by the Bank of England (BoE) too.
The BoE did hold rates at a 15-year high of 5.25% for the third time in a row. And governor Andrew Bailey said there’s “still some way to go” in the battle with inflation.
Rate cuts soon?
But other central banks are already talking about easing the squeeze. And hope is growing that we’ll start to see cuts not too far into 2024.
That would, hopefully, boost the stock market by lowering the attraction of the bond market.
And, often, investors need to see signs that others are getting back in before they make any moves themselves. I think we might just be seeing the first signs of that now.
So could the FTSE 100 reach 8,000 points by the end of 2023? Well, it would mean a rise of less than 5% from the time of writing.
Shares on the up
That’s not a big move. We’ve seen plenty of bigger ones in far shorter timescales. It’s got to be possible.
Looking aside from the index as a whole, I see signs of light from a number of stocks that have been shunned in 2023. High interest rates have piled pain on the shoulders of mortgage holders. And that hit the property market. As a result, investors cast off housebuilder shares like they were yesterday’s socks.
But in the past couple of months, Taylor Wimpey, Persimmon and Barratt Developments have been soaring.
Buying banks again
Even bank shares have been gaining ground again. They dipped quite sharply at the end of October. But since then, Lloyds Banking Group, Barclays and NatWest Group have all risen nicely.
It find it curious that Barclays is the weakest mover of those three, as I’ve seen it as the best value for some months now.
Maybe the bank’s exposure to the US and to investment banking still weighs on it, with less focus on UK interest rates. Or maybe I was wrong. That’s happened before.
What to do?
More important than trying to predict the Footsie, what should we do now? There’s actually no change for me. I still think we should just buy whichever stocks we think look best value for the long term. And pay no attention to stock market indexes.
But I do think we’ve had an unsually good few years for buying UK stocks cheaply. And the more we see inflation fall, and central banks starting to cut interest rates, the more I think we could be getting near the end of these good times.
The future
Anyway, I predict an optimistic and prosperous new year for stock market investors. Yes, I know, I said that last year. And the year before.
But give me a break. I must surely get it right one year, mustn’t I?
