Summary
- FTSE 100 is adequately equipped to surpass the previous record highs
- Earlier in Q2 2020, it rebounded 25% from Covid lows within one-and-half months
- Several factors can uplift the index, while some uncertainties continue to exist.
The equity markets across the world have been through an extremely rough patch in the past 16 months with the leading stock indices witnessing a massive value erosion following the panic-driven selling on the back of elongated fears surrounding the potential aftermath of the Covid-19 pandemic.
FTSE 100 @ 8,000?
As far as the FTSE 100 breaching the psychological level of 8,000 is concerned, the market index is adequately equipped to surpass the previous record highs to register an all-new lifetime peak. Most businesses trading as components of the benchmark index are yet to see a meaningful silver lining that can steer the underlying corporations to pre-pandemic levels of commercial scale.
The market recovery started soon after the index touched a multi-year bottom during March 2020, when most of the investors squared off their respective positions following the fears of losing more.
Also Read | 5 top FTSE growth stocks for August
The headline index corrected approximately 30% between 21 February and 20 March. Interestingly, it bounced back as much as 25% from the multi-year closing low of 5,190.78 to a level near 6,500 on 5 June 2020, effectively in a span of one-and-half-month, irrespective of the fact that the national economic activity coming to an standstill, with most of the commercial setups either completely shut or were operating with curtailed scale.
8 factors that can drive FTSE 100 above 8,000
- A sharp decrease in the value of government debt with the subsidised offerings slated to terminate by the end of September. Several government-backed programmes which include the benefits under the furlough scheme and stamp duty holiday are set to finish by 30 September.
- Widening the blanket of vaccinated people across Great Britain can assuredly diminish the fears among the healthcare professionals and market participants as it will reinforce the maximum level of protection to all.
- A gradual drop in the daily rate of hospital admissions can decrease the overall burden on the National Health Service (NHS) and can certainly bolster consumer confidence, while, at the same time, businesses can ensure a potential uptick in sales. 5 FTSE stocks set to pay their dividends in August
- A moderate-to-sizable reduction in global Covid activity remains the key to worldwide recovery as nobody is safe until everybody is secured and protected to fight Covid-19 and its mutated strains in place.
- With a quick adoption to the post-Brexit regime of international trade, businesses can return to their pre-Covid levels of commercial scale by exploring the untapped and high-potential markets across the world.
- A worthwhile rise in consumer spending can undoubtedly improve the prospects of economic recovery, thereby supporting the markets as well. Ultimately, consumers remain the drivers of the national economy whether we talk of a business to consumer model or a business to business model, as the corporations engaged in B2B activities are somewhere or the other supporting the essential functions that can improve the end user experience.
- Vitalising the employment activity can effectively sustain the consumer spending that can productively steer the businesses, as well as the economy through the choppy phase. Not only the rising number of vacancies can help but the businesses should ensure the professional development of the workforce that can pave the way for a sustained growth in the employment sector with reduced lay-offs and pay cuts that can help reduce the rate of unemployment.
- A decent-sized improvement in cross-border trade can have the potential to strengthen the backbone of the country. Bolstering the quantum of exports should be the focus, as a result of which, the balance of trade can return to positive territory, constructively supporting the market recovery.
Also Read | How long should you hold penny stocks
Persisting wariness
Given the uncertain outlook provided by most of the corporations, the markets remain susceptible to the unforeseeable adversities as the nation continues to report thousands of new coronavirus cases associated with the Delta variant and its sub lineages.
The controlled reopening of the business sectors have significantly helped the system, but several underlying factors are still there. The week-after-week surge in the rate of hospital admissions becomes more worrying, at a time when most of the commercial setups, hospitality avenues, offices and other places equipped to handle large gatherings have resumed for the public.
The double-jabbed people and the individuals who have received a single shot of the vaccine certainly ensures a level of protection against the Covid-19 (SARS-CoV-2) virus and related strains, but with the emerging cases of fully immunised people seeking hospitals so instils a feeling of nervousness amidst the healthcare authorities, as well as a large section of investors who have factored in an estimated growth rate in the forthcoming quarters.
Any potential shutdown, imposition of nationwide restrictions, limitations on domestic or international travel, restraining the number of visitors at hospitality venues can be spoilsport or a major roadblock in the apparently recovering national economy.