After the FTSE 100 breaks records in April, can it soar even higher in May?

The FTSE 100 broke through the 8,000 point level in April, and it looks like it might stay there. Is investor bullishness finally back?

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On 30 April, the FTSE 100 hit a new record of 8,200 points. It beat the previous high of 8,189 points, set just a day earlier.

Has investor confidence finally returned to the UK stock market? We’re still in early days. But the latest results we’ve been seeing from top companies have been mostly positive.

I want to look at two of the UK’s favourite Footsie stocks.

Bank on Barclays?

Q1 profits from the bank sector were down, as expected, but not too bad. And the outlook seems increasingly bright.

I’ll pick Barclays (LSE: BARC) for a few reasons. Not least because the share price has climbed 33% so far in 2024.

There’s one main reason I think Barclays might be a better barometer of UK market sentiment than, say, Lloyds Banking Group. And that’s because it still retains its international investment banking arm, operating in the US.

International focus

A quick look at the S&P 500 and the Nasdaq shows just how bullish the US market is getting. With most of our FTSE 100 stocks being truly international in nature, I think we need to look more at the global picture.

Even after the share price rise so far in 2024, the Barclays valuation still doesn’t look at all stretched. At least, not on fundamentals. Forecasts put the stock on a price-to-earnings (P/E) ratio of 6.5, with a 4% dividend yield.

Have investors forgotten the risks still faced by banks this year, hard-pressed by interest rates? Maybe, but the bullishness does seem to be here.

Rolls-Royce still rolling

The other popular stock I want to look at is Rolls-Royce Holdings (LSE: RR.)

The Rolls share price has multiplied five-fold in the past two years. And, just when it looked like it might be going off the boil in early April and set to fall, it picked back up again.

Some of us were waiting for a share price correction after such a surge. And I really did expect to see shareholders taking some profit off the table now.

They’re still buying

But it looks like the demand is still there. And that lends more support to a key thought. That strong investor confidence could send the FTSE 100 a fair bit higher yet in 2024.

What will happen to the Rolls-Royce share price next? On the one hand, the big gains made in the past couple of years could suggest falls in May and beyond.

But I think we could also make a case that a 2024 P/E of 28 is still good value, with the growth expectations that Rolls now enjoys.

FTSE 100 in May?

So, where might the FTSE 100 go in May, and in June, and…?

Month-by-month movements don’t mean a lot to a long-term investor. And we should make our buy decisions based on individual stock valuations.

But a lot of those still look low to me. Add in that growing investor sentiment, and I see a good chance of more stock market gains in May and beyond.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, Lloyds Banking Group Plc, and Rolls-Royce Plc. 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.

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