Why the FTSE 100 index could hit 39,000 by 2037

At FTSE 100 The index was launched in January 1984 at a level of 1,000 points. But in August 1997, the index broke through 5,000. And that means that within a period of only 13 years and seven months it increased to five times the initial value.

Some of these big gains were driven by telecommunications, media, and technology companies. And many of these businesses achieved higher valuations due to the speculation associated with the early years of the internet.

However, the ‘dotcom boom’ ended badly. And on the first day of trading in 2000, the bull market began to falter. A rapid decline in stock prices. And in the spring of 2003, Footsie returned close to 4,000.

But moving from 1,000 to 4,000 is still a good result for the index during this period. And I think there is reason to believe that a similar move could occur from current levels.

The big reset

For example, we look at the early stages of a bull market for stocks today. And it can be a multi-year event. So, I’m optimistic because the past three years have been traumatic for businesses and stocks. And, in many cases, company valuations have fallen due to bearish markets.

As I see it, the pandemic, the war in Ukraine, and price shocks caused by elevated commodity prices can all lead to a general reset. People have re-evaluated their lives and lifestyles. The company has examined its core business in detail. Investors have evaluated the stock’s valuation. And countries have been reviewing supply chains and security arrangements.

So, from this new, stronger base, the bull phase for stocks has begun. However, when I look at the companies in the FTSE 100 today, it’s hard to imagine some companies growing that much. But they don’t have to.

FTSE 100 dynamic setup

The composition of the index today is very different from what it was in 1984. Companies have come and often left the index over the years. We sometimes lose names due to merger and acquisition activity. And underperforming businesses can get out of the index and drop into it FTSE 250 or other indexes.

But the process works in both directions with faster businesses joining the FTSE 100 to replace laggard companies. And this makes Footsie a dynamic setup that can refresh and renew itself.

Indeed, the index’s ability to regenerate and accommodate businesses that will grow rapidly is what makes me optimistic. But it is not certain that the Footsie will reach a level close to 39,000 in 2036. There is even a possibility that it will be lower than it is now.

However, I like to invest regularly into FTSE 100 index tracker funds to position myself for the possibility of large increases over time. I consider the index to be a viable long-term investment for me because of its dividend yield. Now, it’s almost 3.5%. And my accumulation tracker rolls all dividend income into investments with the aim of increasing profits.