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He FTSE 100 reached a new intraday high on Friday (January 17), peaking at 8,508 points in the early afternoon. It could be even higher by the time you read this.
Persistent inflation, rising business costs and threats of US trade tariffs don't seem to be slowing anyone down.
In fact, inflation news may have helped boost optimism. The UK's December figure fell to 2.5%, far from the Bank of England's 2% target, but it is the right direction.
US Inflation Outlook
And the US core consumer price index (CPI) fell to 3.2% year-on-year, while 3.3% was expected. Again, there is still a way to go, but that is positive.
Falls in sterling will also have helped boost UK share prices.
Profits of multinational companies are closely linked to the US dollar, and the pound has fallen 9%, from $1.34 in September to $1.22 as I write.
in the cards
I think signs of a bull market have been in the air for much of the past year, and I think it shows in the banking sector.
UK investors appear to have been largely introverted over the last few years. But a look at what's been happening to the Barclays (LSE:BARC) share price shows a big change.
Barclays shares are up 104% in the last 12 months. Fundamentally, it is perhaps the most open and diverse of the large Footsie banks.
Global banking
In the third quarter, Barclays reported a 6% increase in investment banking revenue, with a 3% increase in global markets revenue.
If the next US administration relaxes some regulations regarding investment banking as expected, the global outlook for the sector could become even brighter.
Analysts are already predicting increases in Barclays' profits and dividends in the coming years. The expected dividend yield for 2024 has been reduced to 3% after the share price rise. So maybe the stock is fairly valued for now.
While Friday's bullish stock market is a cause for joy, there is a slight downside.
Reasons to be cautious
The Christmas retail period was disappointing, which I think could be a drag on the markets and perhaps even push back the outlook for banks a bit.
Forecasters had forecast a 0.4% month-on-month increase for retail sales in December. But figures just released by the Office for National Statistics show a fall of 0.3%.
Food retailers faced the greatest difficulties, with a drop of 1.9%.
It raises fears that the UK economy may have contracted in the final quarter of 2024. Still, even that has a silver lining. Along with falling inflation, the possibility of an interest rate cut at the February Monetary Policy Committee meeting surely increases.
What does it mean?
So what should investors do as the FTSE 100 rises? Sell and make some profits? Or maybe accumulate now that it seems to be on the rise?
I'm glad to see the optimism, but it doesn't change anything for me. I look to invest in companies with great long-term prospects at good prices. The same as always.
