FTSE 100 investing: 3 reasons the stock market rally will continue

The FTSE 100 index has gained over 1,000 points in the past two months. Manika Premsingh believes it can continue to rise even higher. 

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 index has gained over a thousand points in the last two months, following the Covid-19 vaccine success and a politically stable election result in the US, the largest country economy in the world. 

These are big gains, to be sure.

But still burnt from the 2020 experience, I’m plagued by the question – can the stock market rally continue? The question gains importance because there are indeed risks to the stock market rally. 

On balance though, I think the odds right now are in favour of a continued FTSE 100 increase.

Here are three reasons why:

#1. Brexit-driven stability

The UK and the EU managed to put together a free-trade deal in the nick of time. A no-deal Brexit would have started from 1 January otherwise. This would have made a chaotic beginning to 2021 if the two sides hadn’t managed to see eye-to-eye.  

That threat has passed now.

And it’s showing up in investor confidence as the FTSE 100 index moves closer to 7,000. Brexit uncertainty has kept the FTSE 100 index in limbo for years. I reckon there’s a lot of pent up investor interest that will continue to drive up the UK’s stock markets from here.

It’s true that some aspects, like the financial services sector, cold do with more clarity. But for now there appear to be more positives in investor perception from the Brexit deal than not. 

#2.  Vaccine rollouts support FTSE 100 rally

Even though the UK is in the midst of yet another lockdown, there’s much hope. The vaccine rollout has begun. Some 1.5 million people in the UK have already been vaccinated and the number is targeted to rise to 15 million by mid-February.  That would be more than 20% of the country’s population. 

Both Pfizer-BioNTech and AstraZeneca-Oxford University jabs are being administered, which have high enough likelihood of bringing Covid-19 under much greater control. This hope is enough to continue driving stock markets upwards despite the emergence of the coronavirus variant. 

#3. New US president 

Last, the impact of the US on the global financial system is always something to bear in mind. And there’s been a lot going on there. 2020 was an exceptional year in any case. But it was perhaps even more so for the US because of the uncertainty about it’s national election results.

The election results coincided with the vaccine rollout making it near impossible to figure out how much the results drove the stock market rally. What we do know is that it probably didn’t pull back the vaccine rally either.

If there was still any sense of uncertainty, now with Biden sworn in as president, that too has passed. This can only be good for the financial markets. 

In sum, I think we can agree that 2021 has better prospects than 2020; with both greater stability and increased capability to deal with what comes next.

In the spirit of what 2020 has taught, I’m going to focus on long-term investments, because who knows what happens in the short term! Here are some stocks I’m happy to buy and hold till at least 2025

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

Here’s how I’d invest a £20K Stocks & Shares ISA to target £1,600 in dividend income every year

Our writer gets into the nitty gritty of how he would aim to build sizeable passive income streams from a…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 reasons why I’m loading up on FTSE 100 shares

This Fool thinks FTSE 100 shares look cheap. With that, he plans to continue snapping them up today. Here's one…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Why wait? I’d buy FTSE 100 shares now before the next stock market rally!

Our writer explains why he'd snap up what he sees as bargain FTSE 100 shares now rather than waiting in…

Read more »

Investing Articles

Is it time for me to change my tune about Rolls-Royce shares?

This Fool has steered clear of buying Rolls-Royce shares. But after its recent performance, he's reconsidering his stance. Here's why.

Read more »

Investing Articles

Aviva share price: 3 reasons to consider buying for 2024

The Aviva share price is still lower then when I bought some nearly a decade ago. Here's why I'm thinking…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

These 2 shares could bank me £328 a month in second income

Jon Smith runs through two FTSE stocks that have above-average dividend yields that could pay out a generous second income…

Read more »

Stack of one pound coins falling over
Investing Articles

This passive income plan is simple – but could earn me thousands!

Christopher Ruane explains how putting a fiver a day to work in the stock market might help him earn thousands…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on

After record profits, are Lloyds shares a buy, sell, or hold?

As Lloyds pulls in pre-tax profits of £7.5bn, boosts its dividend, and continues to repurchase shares, are the company’s shares…

Read more »