17.01.2025
Have you noticed just how our UK equity market has been firming up since just before last Christmas?
The FTSE 100 Index was standing at just on 8,002.30 on Friday 20th December, last night it closed up 90.77 at 8,391.90.
This morning it has opened up 80.12 points better at 8,472.02, now almost 6% better than just before Christmas.
That rise effectively belies the pressures that the media considers we are all under.
Reports of disastrous retail sales, over the Christmas and New Year Sales period, what actually took place were nowhere as fearful as various parts of the UK media were forecasting, that has been clearly shown by a handful of top retail groups reporting better than expected business.
And as for commerce generally, obviously every company boss can whine about the added employment costs, but even they are looking for business to advance this year and next.
The FTSE 100 Going To New Highs
As I see it, the FTSE 100 is very close to breaking up through the 8,474.40 High reached in May last year and then heading quickly to 8,600 before a pause.
At a recent lunch I was asked where I thought that the FTSE100 would end 2025 – my immediate answer was 9,300 – which caused a certain guffaw from the assembled company of financial hacks and company bosses.
That breakthrough to 8,500 and above could possibly occur as Trump takes the reins again.
I take the view that British industry and commerce will show its ability to cope with financial and economic pressures and forge ahead.
Obviously, we could succumb to a new health scare, like Covid or a similar virus, or there could be fresh wars breaking out globally, even so I feel that the UK just knuckles down and copes.
Interest Rates
As they say, Governments come and they go, in the intervening periods the incumbents can cause chaos or really oil the economic wheels – while the UK public just sucks it up and carries on (while whining or moaning at will).
The current Government has big problems of confidence in its economic decisions, while its plans for growth seem to be nothing more than words of hope and not distinct.
As it navigates through the elements of slower economic growth against a background of persistent inflation, will Starmer, Reeves et al show any real mettle?
I believe that after the latest rate of inflation news, an early cut in interest rates may be the necessary measure to put in place, with several cuts to follow over the year.
If then they accompany that with other forms of stimulation, we may well see a positive reaction.
House Prices
As for house prices, lower interest rates would certainly help to boost business within the residential housing sector, which in turn could help to push property values slightly higher again – which in turn could be inflationary, so it needs careful stimulation.
Gold To $3,000
And finally, as for Gold – well at that same pre-Christmas lunch I forecast $3,000 for Gold.
However, if Trump comes into power and does what he promised – unusual I know for a politician – then he will settle the Israel/Hamas and the Russia/Ukraine conflicts overnight.
We all know that would not come to pass in haste, however as the possibility of such accomplishments become evident, then it is possible that those that have ‘bought’ gold as a hedge, may well start to reduce their positions, with a fall in the yellow metal’s values.
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