In November so far, the FTSE 100 index has reached 7,297 points. This is the highest level seen since February 2020, which was just before the pandemic started. In fact, the index right now is just 0.6% below its pre-pandemic level. In other words, the stock market’s headline index’s recovery is almost complete.
But that is not the goal. It is a relief, yes. But goal? No. As an investor, I would really like to see the FTSE 100 index rise even more, because that would be a reflection of the performance of the stocks I hold as well. And the question that now comes to my mind is whether the FTSE 100 index is likely to touch 8,000 in 2022?
Waning pandemic, Brexit relief
I think it could. Even though, this would be a new all-time high for the index. In fact, if the pandemic had not happened, I reckon there was a good chance it could have happened much sooner. The FTSE 100 index was in a limbo for a few years because of Brexit. The terms of separation between the UK and EU were only decided in December 2019, which gave a spurt to the stock markets. This continued into early 2020, before it fell off a cliff as the pandemic happened. And it is yet to get back to its early 2020 levels.
Now however, the pandemic is more likely to recede further over time than not. And now I think now the relief of Covid-19 being closer to its end game, as well as any positive impact of getting out of the Brexit stalemate, could start playing out. This could push the FTSE 100 index higher.
Growth prospect are fine
Further, the UK’s growth prospects look decent for 2022, which is a positive. But many companies that constitute the index are actually multinationals, which means that they are impacted by growth in other countries as well. There is good news on this front too. Even though leading forecasters have had to downgrade their outlooks because of slow progress on the pandemic, the future still looks bright.
What do FTSE 100 trends say?
The trends, if continued, also support the possibility that the index could reach 8,000 next year. So far in 2021, the FTSE 100 has risen by 1.1% month-on-month on average. If it continues this growth into the next year, by September 2022, it would average 8,000+ levels. It could even get there sooner, I feel.
My takeaway
Of course, a lot can go wrong as well. This year’s FTSE 100 growth could have been higher because of the stock market rally that started last November and carried into early this year. It might not continue. Also, inflation is now high enough to be able to derail recovery if not tackled quickly. The pandemic has become a challenge in some countries again. Austria has gone into full-lockdown and Germany could follow suit. The good news though is that we now have enough tools to deal with both situations. I am optimistic that the index will touch 8k next year and I am planning my stock purchases for the year based on that belief.
