Could we see the FTSE100 push above 9,000 in H2?

When I looked back at the end of last year at how the FTSE100 had performed during 2024, I posed the question as to whether the UK index would finally throw off the shackles of inertia which have caused it to underperform for so many years relative to its peers.

The break above 8,000 in the early part of 2024 to new highs of 8,400, offered hope that this might happen, however as with most new record highs the FTSE100 has set over the years the rally fizzled before settling into a range again, with 8,000 offering modest support initially. 

In its defence the UK market hasn’t been helped by its governance, as well as the political environment which by and large hasn’t and isn’t conducive to risk taking.

While the FTSE100 has lagged, its peers overseas have performed so much better, with gains in excess of 40% for the DAX, S&P500 and Nikkei 225 over the last 3 years.

In the early part of this year there were encouraging signs that the UK index might be on the cusp of playing catchup, breaking through its previous peaks in mid-January to surge as high as 8,900 putting it within touching distance of the 9,000 level.

Once again sadly momentum was lost, although to be fair that was true of all major stock markets in early April as President Trump’s tariff liberation day announcement sent bond yields soaring and stock markets tanking by between 10% and 20%.

A quick about turn in the face of turbulence in the bond market soon put markets on a more even keel, however it’s still been a long haul back, with many suggesting at the time that the current rebound was no more than a dead cat bounce.

Now we’ve seen US markets recover back above their previous record highs this argument doesn’t hold up, with both the DAX, S&P500 and Nasdaq 100 all posting fresh record highs despite seeing sharp falls at the start of the quarter which saw US indices post 15-month lows.

The FTSE100’s decline was even more marked, although in percentage terms it fell less sharply, it still fell to an 18-month low but also quickly recovered, although it hasn’t, as yet, been able to make a new record high, although it got pretty close during June.

Nonetheless the absence of a stronger rebound in UK equities, along with further evidence that companies are losing confidence in the UK has continued to raise questions about valuations of UK companies.

Last year the UK saw the loss of the likes of TUI, Just Eat Takeaway, CRH, Flutter Entertainment, and Darktrace, soon to be followed by Ashtead and Hargreaves Lansdown.

This year has seen the slow bleed continue with the announced departure of Wise to the US, while Alphawave, a small Cambridge based chip and semiconductor maker, is being snapped up by Qualcomm for the sum of $2.4bn, while Deliveroo is also going, bought by US based DoorDash.

Not content with that, Shein, the China founded fast fashion group decided that rather than listing in London, after the US turned its nose up, it would list in Hong Kong, while big FTSE100 company Unilever decided that it would IPO its ice cream business, the Magnum Ice Cream Company in Amsterdam.

Since 2021 when the London Stock Exchange saw a record year for IPOs with 126 companies listing and a total of £16.8bn, the picture has deteriorated sharply, with less than 20 in 2024.

So far this year we’ve seen the meagre sum of 5 IPOs, less than the 7 seen during H1 2024, raising a total of £150m.

In terms of M&A the picture is slightly better but over two-thirds of it has been overseas buyers, with domestic buyers only accounting for one-third of M&A activity here in the UK. It would appear that there is value in the UK market, yet UK buyers don’t appear to be that interested.   

We’ve continued to hear a lot of pearl clutching about this state of affairs, and it is true that the voices are getting louder with Conservative party leader Kemi Badenoch urging business leaders to “get on the pitch too” when it comes to promoting the City of London, at a recent conference.

While a welcome intervention, what does she think business people have been doing for the last 20-years or so, picking their noses?

When business people have tried to engage with UK politicians in the past the process has generally been time consuming as well as tedious, with this week’s reports that one of the UK’s biggest companies AstraZeneca might follow suit being the latest example of business frustration when it comes to doing business with the UK government.

Who can forget the decision by AstraZeneca to pull the plug on investing in its Speke operation at the end of last year in frustration over the government’s penny pinching.

Politicians like Badenoch, or more to the point the party she is now leader of, have been part of the problem for years, and continue to be so.

The reality is that the UK has become less investable due to higher taxes, removal of reliefs on dividends, stamp duty, less retail flow, and higher regulatory barriers for pension funds, and a completely disengaged retail base.

Until that changes then the slow bleed is likely to continue when it comes to UK companies being undervalued, and while there has been talk that rewriting ISA rules could force UK savers to change the way they invest, this may be harder to achieve than politicians think.

This type of mindset is the biggest hurdle as far as the UK stock market is concerned, and the fact that a lot of big UK companies appear to be giving up on it. If AstraZeneca goes, who will be next to shift their domicile? Shell has already reportedly been considering it and that is the fear. Once one of the big guns pulls the ripcord, then that trickle could become a flood.  

Quite simply a lot of UK savers perceive the stock market as too risky, completely oblivious to the fact that any pension they have is likely to be tied up in how it performs already.

It is true that to the uninitiated, stock market investing is risky, but it’s no less risky than keeping your money in a savings account and watching inflation erode the value of it.

What is needed is a lowering of barriers to entry, starting with the removal of the stamp duty surcharge to encourage people to think more broadly about how to maintain the value of the money in their pocket.

The fact is around 60% of Americans have investments in the stock market, compared to 26% of people in the UK. That is simply pitiful and serves to reflect the low level of engagement when it comes to investing.  

That, however, is for another conversation, as we look back at how UK markets have performed in 2025 so far, and whether we’ll see a new record high which may see the FTSE100 crack 9,000 in the second half of this year.

In fact, as far as this year is concerned the FTSE100 (black line) has outperformed its immediate peers, with the exception of the DAX, falling just over 10% from its peaks during the April sell-off, compared to the S&P500 and Nikkei 225 which fell much further.

More record highs for FTSE100 in H1 2025

Having managed to outperform its peers during the first half of this year the next question is whether it will continue to do so?

In many ways this ought to be a fairly easy question to answer given the uncertainty and choppiness we’ve seen over the last few months.

Despite all the volatility inspired recent events, the resilience exhibited by markets suggests that for now the line of least resistance appears to be higher, with momentum clearly favouring that direction.

Not only have we managed to shrug off the uncertainties around President Trump’s tariff policy, although that risk does tend to ebb and flow with his mood, but we’ve also managed to ride out the volatility brought about by tensions in the Middle East.

That leaves the uncertainty around future US fiscal policy as well as the prospect of further central bank rate cuts as the next proverbial shoe to drop, although this year’s US dollar weakness suggests that markets are already positioning for that.

As far as the FTSE100 this year’s winners so far have managed to continue the momentum that we saw during 2024, with strong performances in banks and defence, while the commodity sector has acted as the main drag, with weakness in mining stocks, as well as oil and gas.

This sector weakness also helps to explain why the index has largely underperformed given that the top 10 companies by market cap include the likes of HSBC, Shell, AstraZeneca, GSK, Unilever, BP, Rolls-Royce and BAE Systems, and who make up 45% of the total market cap of the index.

Of those 10 companies, only Rolls-Royce and BAE Systems have posted double digit percentage gains of over 60%, which helps to explain the relative underperformance of the index as a whole.

The best performers have been defence contractor Babcock and Mexican gold and silver miner Fresnillo, both of which are up over 125% year to date.

The weakness in oil and gas prices has weighed on the likes of BP and Shell, with the BP share price down over 5% even with the renewed speculation it might be a takeover target.

Financials have also continued the strong progress seen in the last 2 years with Lloyds Banking Group leading the pack here with gains of over 40%, followed by NatWest and Barclays which have seen gains of over 25%.

Other notable outperformers have been Next PLC which once again posted a strong set of numbers in Q1, although as far as retail is concerned, they were the exception with JD Sports seeing losses of 7% and M&S of 5% due to the recent cyber-attack.

Mining stocks also proved to be a drag despite firmer copper prices with the likes of Glencore, Rio Tinto and Anglo American feeling the effects due to concern over tariffs, which if continued will likely see significant impact on profit margins.

The worst performer has been advertising giant WPP whose shares are just above 5-year lows as investors fret over another poor quarter of declining revenues, and the announcement that CEO Mark Read has decided to retire at the end of this year.

In an era where big corporations are using AI, and the advertising tech of Alphabet (Google), and Meta Platforms, to drive home their messaging there has become less of a need to use big advertising giants like WPP.

Consequently, the whole legacy advertising industry is struggling to adapt to this change of mindset and any new CEO is likely to have his hands full in pulling WPP out of a slump that has seen its share price more than halve from its 2022 peaks of 1,230p, and well below its record highs of over 1,925p set all the way back in 2017.  

In the US the Dow has lagged the broader market with the main drag being United Health, down over 30%, while Apple has also struggled, down over 15%. Banks have outperformed here as well with Goldman Sachs, JPMorgan seeing decent gains, while IBM has been the best performer, while Microsoft and Nvidia are also in the top 10. 

Despite this we should never underestimate the possibility of the unexpected, but in the absence of a grey or black swan event where else is the money likely to go?