The FTSE 100 got off to a rocky start in 2021. But since March it has been gaining ground. It closed Friday at 7,034 points, up 9% since the start of the year. And it almost managed to stay above 7,000 points for a whole week, except for a dip to 6,998 points on Wednesday.
Will the FTSE 100 ever break through 8,000 points. And will it stay there? My guess is yes times two. The Footsie has had one of the worst decades I’ve seen. But over the long term, it’s always got through down spells and carried on upwards. I don’t expect that to stop. So what about 2021?
I’ve been thinking about the stocks that are driving the FTSE 100 this year. And I’m seeing positive signs that companies in a number of sectors are emerging from the pandemic in a better state than expected.
The banks appear to be coming out of it reasonably strongly. I’ll pick just two. Barclays shares are up 25% so far in 2021, which is way ahead of the index. And Lloyds Banking Group is doing even better, up more than 35%. Bad debt provisions made by the banks during the pandemic appear to have been unnecessarily high. And freeing up some of that could help boost dividends.
Back to Brexit
It’s possible that the 2020 crash has been hiding the horrors that Brexit will become. And that could depress the banks again. But I think the effects will be less tough than I’d feared. If the banks keep on heading up, that should help the FTSE 100 for the rest of the year.
If you’d asked me last year which companies I thought would hold back the FTSE 100 in 2021, I would not have hesitated to point to BP and Royal Dutch Shell. Over the short term, we had another oil price slump. And over the longer term, we face the climate change crisis and the urgent need to drastically cut our dependency on hydrocarbon fuels. BP even chose the depths of the crash to announce its net-zero plans. And that gave the shares another kicking.
But, though both oilies are well down from their pre-pandemic prices, they’re faring reasonably well in 2021. Shell has gained only 2.6%, but BP shares are up 20% so far. So maybe they won’t be the drag that I’d feared.
FTSE 100 drag?
Among the biggest FTSE 100 stocks there’s Unilever, which does fine in the long term. But after a relatively resilient pandemic spell, the shares have been falling back. So far in 2021, Unilever is down 5%. So that could put a drag on the index as investors move away from last year’s safety flight. AstraZeneca is up there too. After an early 2021 wobble, the shares are now up 9.5% year-to-date. We’re looking at a trailing P/E of around 40, though. So maybe AstraZeneca won’t do much to drive the FTSE this year.
I’d never make an investment decision based on where I thought any price was likely to go in just one year. But I am bullish over the FTSE 100’s prospects for the coming years. Where will it end 2021? I’ll stick my finger in the air and guess around 7,500 points.