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2025 has proven to be another spectacular year for FTSE 100 stocks. The UK’s blue-chip index of shares is up 15% since 1 January. If things continue, it stands to obliterate the 6% increase enjoyed over the course of 2024.
On the one hand, the Footsie’s rise is all the more remarkable given severe threats to the global economy and political landscape. Problems like resurgent inflation and trade tariffs could still impact the index in the coming weeks and months.
Yet some City analysts believe UK share prices could continue rising. Indeed, analysts at Saxo Bank have identified 10 different reasons why FTSE 100 shares could reach the magic 10,000-point marker by Christmas.
10 of the best
Investor strategist Neil Wilson has identified 10 reasons why the FTSE could reach five-digit territory by the festive season.
These are:
- The cheapness of FTSE 100 shares, which trade on a forward price-to-earnings (P/E) ratio of 14.3 times versus 22.6 times for the S&P 500.
- The highest dividend yield in developed markets, making the index more appealing with investors “increasingly chasing income.”
- Rotation out of US stocks due to “ongoing economic policy uncertainty in Washington.”
- Geopolitical uncertainty, and more specifically confirmation of US tariffs by the Supreme Court.
- A high contingent of companies with strong balance sheets like miners, tobacco, drinks and defence stocks.
- Large exposure to cyclical and value sectors, segments that tend to thrive during inflationary and higher-interest-rate periods.
- Fiscal problems in the UK that are pressuring gilts and sterling and thus making “UK stocks more attractive relative to overseas peers.”
- Strength among mining shares caused by debt debasement, dollar weakness, and (longer term) from the energy transition and artificial intelligence (AI) boom.
- Robust performances from defence stocks due to “rising geopolitical tensions in Europe and continued NATO pressure.”
- Rising pharmaceutical shares should tariff-related uncertainty ease.
Thinking long term
Yet predicting the near-term movement of stock markets is notoriously difficult business. And the outlook is especially uncertain today given the huge challenges facing the global economy, so further FTSE 100 rises are by no means guaranteed.
I believe a sharp retracement cannot be ruled out in the current climate either.
This is why thinking long term is so important. Stock market volatility is inevitable at some stage, and, as I mentioned, tough to forecast. So buying and then holding stocks for years (ideally more than a decade) gives investors the best chance to make a positive return.
Legal & General (LSE:LGEN) is a UK share I’ve just bought for my own portfolio. It’s risen 3% in the year to date, far lower than the broader FTSE 100. It could continue to struggle too if economic conditions stay tough and consumers trim spending on discretionary financial products.
But this hasn’t dented my appetite. This is because, over a longer-noterm horizon, I’m confident profits will boom as ageing populations drive demand for its investment, insurance and retirement products.
Legal & General has exceptional brand power it can use to capitalise on this opportunity. And on top of this, the company has a strong balance sheet it can use to invest in the business to boost growth.
I plan to continue buying FTSE 100 shares like this, whatever happens with the index between now and Christmas.
