Stock market rally: the FTSE 100 to pass 9,000 this year?

The stock market has provided quite a few surprises over the past few years. And recently, despite dire economic forecasts, we’ve seen UK stocks continue a run that looks set to stop.

So what’s next for FTSE 100? Can it keep going up?

Is 9,000 possible?

UK shares have rallied since Rishi Sunak took over from Liz Truss. There’s no doubt that Truss and the chancellor’s plan to manage the ailing economy are weighing on the market. In October, the index fell to 6,707.

The fall highlighted how vulnerable the stock market was, at the time, to higher levels due to unconventional economic governance. In my opinion, we have gone from one extreme to another. From mini-budget kamikaze in Truss, to sound economic governance in Sunak. And the market has responded.

So where next?

Well, some forecasts suggest the FTSE 100 continues to gain. The Economic Forecast Agency said that the index could reach 9,275 in July. The highest of these predictions. More likely to close 8,750, according to the agency.

Earnings do not disturb the market

Earnings data is an important indicator of general market direction. Now, we have reached the end of the earnings season, and this time there are not many surprises.

Some analysts have suggested that the bank’s earnings are disappointing, but I don’t think so. There is nothing to spook the market, or change investor sentiment. When Barclays estimates are missed by less than 3%, HSBC increase.

There is even good news for the embattled engineering giant Rolls-Royce. The company beat forecasts by some distance, recording an increase in all business segments.

What can move stocks?

To move forward, we need to look at macroeconomics. And now, there are some positive comments. First, this week we have Treasury Secretary Janet Yellen saying that the global economy appears to be stronger than forecasts suggest.

This is important for the FTSE 100 because of its weighting towards mining and energy stocks. A strong global economy tends to demand higher resources, which drives the sector up.

The index could also be boosted by the improved economic outlook in the UK and the recent agreement on Brexit. A deal on the Northern Ireland protocol will unleash tens of billions of business investment for the UK, according to reports this week.

Investment in the UK has been very low since the Brexit vote. I think everyone in government knows that something needs to change – I hope the Eurosceptics do too. The UK economy is about 5% smaller than that of the EU and the loss of output is up to £100bn a year.

However, there are many risks that could damage the market. There is obviously concern about the escalating war in Ukraine and geopolitical tensions with China. But we also need to keep an eye on US debt – the US could hit the debt ceiling as soon as June – in addition to Japanese bonds. What the Bank of Japan does next could move the market.