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Will the FTSE 100 surge in September? 1 reason why I think the answer is YES

These are extremely testing times for FTSE 100 investors. The country’s premier share index has been up and down like a see-saw in August but, for the most part, the action has been downwards. Indeed, the Footsie has threatening to tumble through the critical 7,000-point marker on more than occasion.

The fast-changing macroeconomic and geopolitical landscape means plenty more volatility could be in store over the next month. But here I discuss why the index could surge in the weeks ahead.

The Brexit boost

For UK investors, the fast-approaching Brexit deadline of October 31 will likely dominate their actions in the coming weeks. And I’ve a strong suspicion the Footsie will be a strong beneficiary of events over the next month.

The issue of the Northern Ireland backstop has long plagued progress between UK and European Union lawmakers. It’s the chief reason why Britain stands on the edge of the no-deal precipice too.

In dialogue last month, German chancellor Angela Merkel suggested Boris Johnson has 30 days to present alternatives to the backstop and get talks up and running again. But the chances of sorting the problem are zero to slim. French president Emmanuel Macron shot down the possibility of progress straight afterwards, branding key parts of the withdrawal agreement like the backstop “genuine indispensable guarantees” which cannot be altered. Macron is proving to be the prime minister’s biggest opponent and his stance is unlikely to soften in the weeks ahead.

And Johnson doesn’t only face a battle with European lawmakers either, as hardline Brexiters in his own party line up to lambast other parts of the withdrawal agreement. The new man in Number 10 seems to have an impossible task to try and achieve results in an extremely short amount of time.

Ways to ride a Footsie rise

So how does this bode well for the Footsie? Well, a failure to break the impasse with lawmakers at home or on the continent by late September would likely drive fresh buying into firms which don’t rely on the UK to drive earnings. Ones which the FTSE 100 is, of course, jam-packed with — from pharma giant AstraZeneca and telecoms play Vodafone to drinks manufacturer Diageo.

In addition to this, any failure to solve the backstop issue would also likely cause sterling to sink to fresh depths. The pound has already plunged close to parity against the euro over the summer in response to the growing threat of a no-deal Brexit. And this would benefit large swathes of Britain’s blue-chip index, whose reportage in either dollars or euros provides a handy earnings boost whenever the UK currency slides.

Now there’s a couple of ways that investors can ride a flying Footsie. They can stock up on individual shares, like the ones I mention above. Or they can buy a FTSE 100 tracker fund which follows any movements in the index.

Now there’s a variety of other factors that could help or handicap the FTSE 100 in the weeks ahead, from US-Chinese trade talks to noises about rate action from the Fed. But I reckon the size of the Brexit problem and the shortage of time to solve it gives plenty of reason to expect the index to soar in September.

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Royston Wild owns shares of Diageo. The Motley Fool UK has recommended AstraZeneca and Diageo. 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.