Can the FTSE 100 hit 8,000 and stay there in 2023?

After reaching record highs in 2018, the UK’s main index spent the next five years underperforming. That was until last week, when it hit some intraday highs. Moving forward, prospects for FTSE 100 generally positive. However, I think maintaining that level might be difficult.

The UK’s flagship index has started 2023 with a bang. Despite the looming UK recession, it has gained nearly 400 points since the start of the year and is still going strong Dow Jones. It’s no surprise to see record highs last week. But why did it end?

Yes, many FTSE 100 companies derive their profits from outside the UK. In fact, most of the profits come from emerging markets and the US. So, the slowdown in UK economic activity is not detrimental to the company’s profits. What’s more, some undervalued stocks have caught the interest of investors like me.

Although the Footsie has been criticized over the years for its lack of stocks and tech stocks, the index’s weighting of blue-chip names has outperformed over the past year. This is because many constituents have benefited from higher oil and commodity prices, rising interest rates, and the reopening of China. As a result, the index has risen 15% from the bottom in October.

Running out of steam?

I think that the FTSE 100 will continue on its upward trajectory towards the 8,000 mark. However, momentum beyond that could be limited, according to some analysts. This is because a large number of stocks have increased in value over the past month and a half. So, some of them don’t exist anymore because the price is more expensive.

A slowdown in China, global inflation back to 2% and successful peace negotiations for Ukraine are all elements that could lose the FTSE 100 crown in 2023.

TAM Asset Management CIO James Penny

Liberium analyst Joachim Klement expects the FTSE 100 to fall. He expects oil prices to fall in the coming months as the US and UK fall into recession. Contrarians will point to China’s reopening as a counter to this, but growth has been slow so far. Additionally, financial stocks could peak when the Bank of England appears to be pausing rate hikes or even cutting interest rates. This will stop the number of banks making huge profits.

Prediction is a Fool’s game

That said, it is worth noting that trying to predict the stock market is a waste of time, because anything can happen in the next 12 months.

We don’t know what the stock market will do when it opens on Monday. We have not been good at times. We are smart enough to recognize when we have enough money.

Warren Buffett and Charlie Munger

So, even if the FTSE 100 cannot maintain the high of 8,000 for a long time, I still plan to buy UK stocks at a reasonable price. After all, there are many trading at low multiples, with solid financials and good growth prospects. Consequently, I have identified a number of solid companies that I buy for long-term growth and solid dividends.