Will the FTSE 100 hit 8,000 again in 2023?

The UK’s main index finally did – reaching an all-time high of 8,014 at the end of February. However, since then, fears surrounding bank stocks, as well as weak industry data, have taken their toll to drop over 600 points. With headwinds picking up, work on FTSE 100 make it back up high?

Citi analysts are not so bullish

Analysts from Citi not very optimistic about the prospects for the FTSE 100 this year. Brokers have now revised their predictions for the UK market to finish the year at 7,600 points, from the initial 8,000 points. However, there is a reason for this.

The recent turmoil in the banking sector has fueled fears. Meanwhile, manufacturing activity has contracted, made worse by China seeking to cap commodity prices. And given that financials, industrials and materials make up 43.4% of the FTSE 100, it’s understandable why optimism has stalled.

Banking on a soft landing

Thus, it’s not hard to see why the bullishness for the FTSE 100 at the start of the year has been tailing off. Inflation remains high and further rate hikes from central banks are not excluded. While this is usually good for banks, it may add stress to an already fragile banking system.

This has not been helped by a new report released by S&P, which predicts that inflation will worsen in the UK. Credit agencies expect inflation to remain high at least until the end of the year, which could lead to further rate hikes.

Conversely, the Bank of England sees inflation falling to around 2% by the end of the year. It also expects this to happen without the UK plunging into recession, due to consumer power. The latest retail sales data is proof of this.

Should I still buy FTSE 100 shares?

All this leads to the question whether FTSE 100 shares are still worth buying if there is not much room for the index to grow. Yes, the Footsie may not be able to reach 8,000 points again in 2023, but that won’t stop a cheap stock with huge potential for growth this year.

After all, UK stocks, famous for their cheap prices, are now even cheaper. This is especially the case with bank stocks. Stronger capital and buffers in UK banks make current valuations attractive, which presents a buying opportunity.

But if that doesn’t appeal, I still have a range of other cheap FTSE 100 stocks to invest in, such as miners, retailers and even housebuilders. One of the stocks that caught my attention was Taylor Wimpeywhich has an 8.2% dividend yield and trades at large valuation multiples.

Either way, I don’t really like short-term noise and volatility. However, I prefer to invest in companies based on their fundamentals and future prospects, and the FTSE 100 has many stocks with just that.