For FTSE 100 investors these are exciting times. Following the Santa Rally of late 2019, share picker appetite has remained buoyant and as a consequence, Britainâs blue-chip index has barged back through the 7,600-point milestone in Thursday business.
The Footsieâs now just a whisker below the all-time closing high of 7,877.45 hit two Mays ago. And there are a couple of significant reasons why the index could barge to new record peaks in January.
Good news for trade talks
Thereâs a lot of scepticism still doing the rounds over recent White House reports about a trade breakthrough with China. President Trumpâs team members have been hitting the airwaves with gusto since mid December to celebrate a Phase One trade deal that had been hammered out with Chinese lawmakers. To the chagrin of many, however, confirmation from Beijing that a deal is ready to be signed is yet to be communicated And on top of this, concerns persist over when the second phase of talks will begin in this US Presidential election year.
Still, the noises coming out of Oval Office are feeding hopes that we could be over the worst of recent trade tensions, while recent comments also contain a bit more detail for optimists to latch onto. President Trump just tweeted that he will be signing a âvery large and comprehensiveâ Phase One deal on January 15, while adding that âat a later date I will be going to Beijing where talks will begin on Phase Two.â
This comment, along with others from the Trump administration over the last month or so, clearly doesnât answer all of the questions around issues that could still derail trade talks later in 2020 and beyond. But signs of action between the two superpowers, as per the commander-in-chiefâs aforementioned statement, could help the FTSE 100 scale new heights.
Further pressure for the pound?
Itâs possible that further weakness in the pound could power the FTSE 100 to fresh highs this month too. To repeat, with large groups of companies in the index opting to do their accounting in a foreign currency, their bottom lines benefit from any drop in the pound, and by extension, so do their share prices.
This has been quite apparent in New Year trading, the Footsie marching back towards late Decemberâs seven-month peaks. The pound has fallen again today, and as I type is down more than half a cent against the US dollar on Thursday as fears over Brexit have resurfaced.
A report just released from the Bank of England underlines the tension over the UKâs future relationship with the European Union. According to Decemberâs Monthly Decision Maker Panel, the number of chief executives at small, medium and large business who expect Brexit uncertainty to persist until at least 2021 continues to rise. At 42%, this is up markedly from the 35% in November who said that they expected the fog to keep lingering in 2020.
This is likely to be a theme that we hear more of in the coming days and weeks, in my opinion, and so further falls in the value of sterling can be expected.