FTSE 100: Seasonal gains in sight? [Video]

Listen to the latest seasonal insights for the FTSE 100.

Medium-term buyers in major world indices are still expected due to the large US stimulus package passed ($1.9 trillion) and potentially still to come ($3 trillion). This means that any medium-term dips lower major equities should find buyers.

The UK FTSE 100 index is entering into a strong time of year where it tends to see seasonal gains. Over the last 15 years, the FTSE 100 has risen 12 times between March 25 and April 30. The average return over the last 15 years has been +2.64%. The maximum profit was +10.17% in 2009. There have been 3 losses in the last 15 years. The largest drop was in 2012 with a -2.74% fall.

This seasonal period is one of the strongest patterns for the FTSE 100 and is only to be surpassed by the November to December period over the last 15 years.

Trade risks

• There is a growing risk that investors consider equity markets overbought and that could see a correction. It is hard to know when that correction will come, but investors need to be aware of the potential risk.

• There is also a risk that a breakdown in the EU-UK trade relationship drags on UK stocks as post Brexit arrangements are still not fully formed.

• Finally, any new strong COVID-19 variant could invalidate this outlook and cause FTSE100 selling.

• Month-end flows are expected to see falls in equity markets and demand in the bond market.

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