The FTSE 100 index of the UK’s biggest companies listed on the London Stock Exchange closed yesterday a record high of 7,383 – after rising 1.6% in one day.
The previous record was broken on 13 January this year, when the index closed at 7,338. The index is still continuing with this momentum during morning trading today. At the time of writing it had reached 7,385.6.
The FTSE 100 index has now posted a 27% rise since it plummeted to 5,789 when markets opened on 24 June 2016, after the Brexit vote.
The factors that have caused the recent rise are mostly centred on news from the US – evidenced by the record-breaking rises on indices that side of the Atlantic, too.
Traders reacted positively to Donald Trump’s recent speech to Congress, which many saw as more conciliatory than previous efforts. However, reaffirmation of his commitment to a trillion-dollar reconstruction plan and talk of ‘massive’ tax relief were what was really in focus.
Further energy was given to the FTSE 100 by a fall in sterling versus the dollar, which increases the value of foreign earnings.
“Markets have potentially tricky issues to ponder”
Tom Stevenson, investment director at Fidelity International says: “There are new stock market records on both sides of the Atlantic today as the Trump growth trade and sterling weakness add fuel to the equity fire. Over the pond, it was all about President Trump’s speech to Congress, which overcame initial scepticism to send the Dow Jones Industrial Average through the 21,000 barrier today. It only cleared 20,000 three weeks ago, making this the fastest rise between 1,000 milestones since 1999.”
Russ Mould, investment director at AJ Bell, however, paints a rather calmer picture. He says: “There is no guarantee that history will repeat itself but the figures could be seen as providing support for the old saying that ‘markets climb a wall of worry but slide down a slope of hope’.
“After all, markets have plenty of potentially tricky issues to ponder, including whether President Trump can deliver on his planned tax-cutting, infrastructure-spending and deregulating plan; Europe’s forthcoming elections and their implications for the euro; and the UK’s ongoing debate over Article 50 and what it will mean for our economy.
“The second half of that saying – which is much less well-known – does remind investors to guard against complacency. It is when expectations – and hopes – are at their highest that disappointment tends to follow and those setbacks initially lead to higher volatility and finally a broad market retreat.”