The FTSE 100 has enjoyed a positive week so far, and is currently trading at 7,653 points. This is the highest level since Q1 2020, back to a time before the pandemic caused the stock market crash in March. There are short-term drivers that have helped the index break above 7,600 points that could bode well for further gains this year. So could we see the all-time highs of 7,877 points give way soon?
Reasons for the bump up
Over the past week, there have been several factors that have helped to propel the FTSE 100 to new highs. Firstly, commodity prices have continued to perform well. The Brent crude oil benchmark price has climbed to over $91 per barrel, levels not seen since 2014. With some analysts calling for $100 per bbl before the end of the year, it’s lighting a fire under the likes of BP, Shell, and Glencore stocks.
Aside from oil, travel stocks have also done well. This comes after the announcement from the Prime Minister that a complete end to Covid-19 restrictions could come a month earlier than expected. The easing of travel testing for half-term is also positive news in this regard. As a result, the International Consolidated Airlines Group share price is up 11% over the past week. The move higher in other travel and retail stocks has helped to raise the index as a whole.
Both these points are short-term drivers. However, both can act to push the FTSE 100 higher still. For example, travel stocks are jumping with anticipation of stronger consumer demand. If trading updates later this summer confirm or exceed this then there could be further upside for this sector.
Could the FTSE 100 break the record?
Before I get ahead of myself, there are a few levels that need to be broken before all-time highs are made. To begin with, the FTSE 100 struggled to break 7,700 points back in January 2020. It also broke but couldn’t hold above this level in July 2019.
Back in 2018 (when the all-time high was made) the FTSE 100 pushed to new highs above 7,800 but then faded away, and a month later actually broke below 7,500 points briefly.
From this historical performance I can see that there’s more work to be done. Firstly, 7,700 as a psychological barrier needs to be broken. From there, it still needs almost 200 points before the champagne can be opened.Â
From my perspective, I value fundamental analysis over studying historical charts. Charts definitely help to pick specific levels to target, but it’s the fundamental reasons that will help levels to be reached and broken. Therefore, from understanding the above reasons, I do think that the FTSE 100 has legs to climb higher.Â
There are some risks to my view. Heightened uncertainty politically and the potential of a snap election could hurt the index. War with Russia and Ukraine also wouldn’t be a positive. Finally, another Covid-19 variant would be concerning.