Here’s why strong investor sentiment could send the FTSE 100 soaring past 8,000 points

On 22 March, the FTSE 100 touched 7,961 factors, simply shy of 8,000. It briefly broke that stage in early 2023, however simply couldn’t hold on.

Can it climb by 8,000 factors once more quickly, after which keep there? I’d say the probabilities of which are rising, for a lot of causes.

Cheery outlook

The important thing one is enhancing investor sentiment.

Russ Mould, funding director at investing agency AJ Bell, stated that “every part has centred round central financial institution rate of interest choices and whereas the US and UK stored their charges stage, it’s all about what might occur subsequent, and confidence is rising that we’ll see fee cuts quickly“.

He added that “threat urge for food is rising; corporates are slowly turning into extra upbeat and persons are earning profits“.

And that must be good for inventory markets, proper?

Income rising

Properly, we’d like two issues for that. In addition to a constructive outlook from buyers, we’d like some sound fundamentals to again up the optimism. And I feel that’s been enhancing for a while.

Forecasts counsel that complete pre-tax revenue from the FTSE 100 ought to break £250bn in 2024, and head even larger in 2025. Again in 2018, when the FTSE 100 was getting shut to eight,000 factors and earlier than Covid put the boot in, that determine was beneath £200bn.

I’m additionally seeing a stream of outcomes that present robust money era. We’re getting robust dividends, and new share buybacks.

Large dividend

For instance, let’s take a look at Phoenix Group Holdings (LSE: PHNX).

The inventory had been on an enormous forecast dividend yield of round 11%. So why weren’t buyers shopping for the shares, pushing the share value up, and forcing the yield down?

I feel the 2 key issues we lacking for this one. Sentiment had been glum. And we didn’t actually have the proof to help upbeat dealer forecasts.

Prime outcomes

Then we bought FY outcomes, the agency introduced a progressive dividend coverage, and immediately the yield appears to be like extra life like. And the share value jumped on the day.

It’s nonetheless in a dangerous cyclical sector, and the insurance coverage enterprise faces new laws. And Phoenix inventory may even be absolutely valued. But it surely’s an instance of the shift that I see taking place.

The remainder of 2024

Hypothesis is rising that we might see as much as 4 rate of interest cuts from the Financial institution of England by the top of the yr. And we’d even see the primary as early as Could.

In the event that they occur, they’ll most likely be 1 / 4 of some extent at a time. However that would deliver the bottom fee all the way down to 4.25%. And that ought to shift the attraction again in the direction of shares once more.

I feel we might nonetheless see a shaky first half this yr. And all this speak of Footsie ranges shouldn’t drive our investing selections anyway. For that, precise valuations and dividends from the businesses themselves are all I care about.

However, only for enjoyable, I’ll put my guess on the FTSE 100 reaching 8,500 factors by the top of the yr.