When The FTSE 100 Hits 7000, There Will Be Fireworks

fireworksThere’s been an awful lot of talk about a possible market correction in recent months. Chaos in the Ukraine, talk of a China property bubble, QE tapering in the US, eurozone deflation… there are plenty of storm clouds out there.

While everybody has been scanning the skies for signs of rain, a strange thing has happened.

The FTSE 100 (FTSEINDICES: ^FTSE) has held its nerve.

Right now, it is hovering around 6800.

Which leaves it only a whisker away from the 7000 milestone.

It just needs a rise of less than 3%, and it’s there.

7000 Reasons To Invest

And when it does hit 7000, there will be fireworks.

First, it’s a nice round figure. That kind of number triggers an explosion of newspaper headlines. Suddenly, the stock market recovery will be front page news.

Many ordinary investors who gave up on stocks and shares years ago will wake up to what has happened since the financial crisis.

Party Time!

In fact, we will get a celebration before then. On Millennium Eve, the FTSE 100 hit an all-time high of 6930. That is over 14 years ago now.

So the first burst of festivities is likely to come when the index tops that figures, to hit 6931.

If it then climbs to 7084, there will be more headlines. That’s because the FTSE 100 hit a low of 3542 on 9 March 2009, in the wake of the financial crisis.

By hitting 7084, it will have doubled in value since those dark days.

That landmark will be another reason to break out the bangers.

The Number’s Up… Or Down

News that the FTSE 100 is breaking new ground may finally wake many investors out of their slumbers. People will start throwing money into stocks and shares again.

Markets may rise even higher.

Or they may fall. 

Frankly, I don’t know what will happen. Nobody does. Only a charlatan claims they can predict future stock market movements.

If the FTSE 100 does finally hit 7000, enjoy the show, but don’t take it too seriously.

After all, 7000 is only a number.

It shouldn’t encourage you embark on a sudden investment splurge.

Smaller, Better Numbers

If you’ve been drip-feeding money into shares over the last five years, you will already have reaped the rewards of putting your faith in stock markets.

And if you plan to invest for the next five, wisely and steadily, you will reap more rewards.

7000 may be the magic number, but other figures are more important. Like the fact that the FTSE 100 is currently trading at 13.67 times earnings.

Traditionally, 15 times earnings is seen as fair value. So this suggests the market isn’t over-priced right now.

With the average FTSE 100 stock yielding 3.52%, you are getting far more generous dividend income than you can get on cash.

I’m certainly looking forward to the FTSE 100 hitting 7000, whenever that happens. I like a firework show. But it won’t make any difference to the way I invest.

If you want fireworks, then check out The Motley Fool's Top Growth Stock for 2014. This company is in one of the Fastest Growing Sectors Of All, and looks set to offer super-charged returns to investors. To find out which stock we rate so highly, click here now.

Harvey doesn't own shares in any company mentioned in this article