The FTSE 100 index zoomed past 7,000 points last week. For me, this is a key milestone. Investors have not seen this level since the pandemic began.
I reckon the index could rise further from here and here are four reasons why.
#1 – Coronavirus
I think most would agree that the pandemic has been brutal. But I think the worst is over. There are several vaccines available and the inoculation rollout so far has been a success.
There have been concerns over vaccine supply issues… and blood clot fears. But most scientists indicate that the benefits of having the jab outweigh the risks. On this basis, I think investors are looking past the peak pessimism and focusing on the world post-Covid-19.
The higher number of vaccinations means that businesses can reopen and take on more staff. This means that money is likely to pour into stock markets that have been hit by the pandemic and the UK’s leading index could be one of them. I think the FTSE 100 could rise further from here.
#2 – More companies
This year has seen a number of companies coming to the London stock market. I have commented on a few of them. These include the likes of Moonpig, Trustpilot and more recently, Deliveroo.
Companies are likely to list when optimism is high. This way a higher valuation could be obtained. This also means there’s more choice for an investor like me.
I feel that as more firms list on the London Stock Exchange, investors are likely to pour more money in. This could in turn boost the value of the UK’s leading index.
#3 – Positive data
We can’t ignore the fact that the FTSE 100 is impacted by other global stock markets. Recent economic data from China and the US indicate that a global recovery is happening.
In fact, the S&P 500 index hit a record high last week. Again, this highlights a positive sentiment. This is likely to have a knock-on effect on the FTSE 100, thereby causing it to rise from its current level.
#4 – Value stocks
Values stocks are typically shares that are unloved but have the potential to recover. There have been numerous companies that have been hit hard by the pandemic and could be considered as potential value stocks.
Last year, tech stocks had a lot of momentum since many people were working from home. But I think in 2021, plenty of investors will be switching to value stocks instead.
Some of these include energy companies and banks, which dominate the FTSE 100 index. I reckon money could be poured into these shares.
It’s great that the UK stock market seems to be recovering. But this also means that it could be sensitive to any negative news.
Further virus variants, lockdowns or delays in the vaccine rollout could result in the FTSE 100 index falling. I’m mindful that it will not be smooth sailing and I certainly expect some volatility.
But in general, I’m confident the worst is over and the UK stock market can rise further.
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Nadia Yaqub has no position in any of the shares mentioned. 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.