Could we see the FTSE 100 hit 10,000?

February was an exciting month for UK stock investors. flagship FTSE 100 The index reached the level of 8,000 for the first time ever and set a new record high. It has since declined and is below 8,000 again although still 9% higher than a year ago.

The recent strong momentum in the FTSE 100 has me wondering. Instead of focusing on getting to 8,000, is it realistic to hope to get to 10,000?

Long-term trends

I think the answer is yes. I think there is a fair chance that the FTSE 100 will reach the 10,000 level over time.

There are several reasons for that. One is that, in the long term, I expect economic growth. That should be good for profits in the largest listed company in the country. These are the companies that make up the FTSE 100. So I expect the index to continue to grow over time.

But patience may be required. The FTSE 100 reached the 5,000 level in 1997. It took more than a quarter of a century from that point to reach the 8,000 level this month.

Another reason I think the FTSE 100 will continue to rise in the long term is because its members are not fixed. Companies are promoted or removed based on market capitalization. So, often companies that have experienced a decline in value lose their position in favor of a rapidly growing stock market.

A rich company BP, Tescoand Unilever has survived for decades in the index. But other former members are now largely forgotten, from Trusthouse Forte to the P & O Steam Navigation Company.

Who knows when

After hitting 5,000 for the first time, the FTSE 100 hit 4,000 again long before reaching 8,000.

The same can happen now. The index can spend years in a holding pattern. It can fall and not recover for decades, as happened to the same Japanese index in the late 1980s. Or it can keep going and reach 10,000 in no time. It seems unlikely to me unless there is a dramatic improvement in the economic outlook – but it is theoretically possible.

So while I’m sure the index will hit 10,000 at some point, I don’t know if it will be in 2023, 2033, 2043, or even 2123!

The quarterback is not the team

It’s good for me.

Instead of investing in an index, I try to build wealth by investing in a variety of individual companies that I think combine great businesses with attractive valuations.

Instead of putting my faith in the team, in other words, I try to pick what I think will be star players. After all, the stock market is not a team game: each individual stock can perform well or poorly, independently of what happens in the wider market.

That’s why I aim to fill my portfolio with winners!