The Motley Fool

The FTSE 100 just hit pre-Covid-19 levels. Here are 3 risks to watch out for now

Graph of price moves, possibly in FTSE 100
Image source: Getty Images.

The FTSE 100 has had a good run recently. On Friday, the index peaked at 7,244 points. That represents its highest level since February 2020 – before the coronavirus pandemic.

Can the FTSE 100 keep rising from here? I think it’s certainly possible, now that the world’s reopening and economic activity’s picking up. That said, there are a number of risks that could derail the recovery and send the index lower again. Here are three I’m watching.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!


The first risk I’m keeping a close eye on right now is inflation (higher prices). All over the world, inflation’s running rampant, and the higher prices are hitting companies’ profits.

We’ve seen this recently with a number of FTSE 100 companies. Take Unilever, for example. Its H1 2021 operating margin was down 1% year-on-year, partly due to input cost inflation. “We have seen further cost inflation emerge through the second quarter,” it said.

On the back of inflation concerns, analysts at JP Morgan recently downgraded Unilever to an ‘underweight’ rating from ‘neutral’, saying it remains at risk of dampening market expectations in H2.

If inflation persists, it could cause weakness across the FTSE 100. It’s worth noting, however, that some companies are more exposed to this risk than others. Packaging companies like DS Smith, for example, are more exposed to inflationary pressures than software companies like Sage.

Sky-high oil prices

Closely linked to the inflation risk is the threat of higher oil prices (oil is a key driver of inflation). Recently, prices have spiked to multi-year highs on the back of major global supply and demand imbalances. Some experts believe prices could go much higher. Analysts at JP Morgan, for example, recently said that oil could potentially hit $130-$150, due to supply problems.

If oil prices were to rise to these levels, I imagine we’d see the FTSE 100 come down a peg. That’s because higher oil prices essentially act as a tax on business earnings, reducing profits. They also reduce consumer spending power. 

Having said that, there are some companies in the FTSE 100 that would benefit from higher oil prices, namely Royal Dutch Shell and BP. If oil does surge higher, I’d expect these stocks to outperform.

Supply chain challenges

Finally, we have supply chain challenges. These are broad in nature and include:

  • Semiconductor shortages

  • Brexit disruption (the shortage of lorry drivers in the UK)

  • Blocked ports in the US (there’s a huge pile up of cargo ships outside LA)

  • Staff shortages due to Covid-19 and government stimulus measures

All of the above are hitting company profits right now. If they persist for a while, (which many analysts believe they will) they could hurt plenty of FTSE 100 shares, including consumer goods stocks and industrial stocks.

I’ll certainly be keeping this risk in mind as I look for stocks for my portfolio in the months ahead.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Edward Sheldon owns shares of DS Smith, Sage Group, and Unilever. The Motley Fool UK has recommended DS Smith, Sage Group, and Unilever. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.