The FTSE 100 is edging towards history. As I write, Britain’s blue-chip index sits at 10,901, just a whisker away from hitting 11,000 for the first time. Maybe I’m getting greedy, but I’m already wondering how long it might take to reach 12,000.
So I asked ChatGPT. Which is a slightly silly thing to do, because artificial intelligence can’t predict where the stock market will be in the next minute, month, year or decade. Nobody can.
ChatGPT admitted as much, exactly as I expected. Which is why I also asked it to explain what’s driving today’s rally. In response, the chatbot pointed to renewed appetite for cheaper, more attractively valued markets after years when US technology stocks grabbed all the attention.
What’s driving UK blue-chip stocks?
Falling interest rates have also helped, while easing fears over the Iran war have boosted investor confidence. A weaker pound has given the internationally focused index a lift too. FTSE 100 companies earn three-quarters of their revenues overseas.
ChatGPT then looked at the factors that could drive the market towards 12,000:
- • Investors continue rotating out of expensive US shares into cheaper UK companies.
- • Lower interest rates support company profits and encourage investors to buy shares.
- • Strong earnings and rising dividends keep attracting income investors from around the world.
It also listed three potential obstacles:
- • Inflation flares up again, forcing interest rates to stay higher for longer.
- • A fresh geopolitical shock knocks confidence and company earnings.
- • After such a strong run, investors decide to bank their profits.
Markets rarely move in straight lines and they have an annoying habit of confounding almost everybody. That’s why I’d never buy shares simply because a chatbot thinks the outlook is bright. Equally, I wouldn’t sell them just because the doom-mongers are predicting a dire stock market crash.
Bullish investors might consider Halma
One FTSE 100 company that could benefit if markets stay positive is safety and environmental technology group Halma (LSE: HLMA). It’s spent years buying high-quality businesses in its niche sector, then helping them grow. That model has delivered remarkably consistent earnings and dividend growth. Incredibly, Halma has increased its dividend every year for more than 45 years.
If confidence in equities remains strong, investors could keep paying a premium for dependable companies with proven long-term records. Halma certainly ticks that box.
Here’s what interests me most. After years of stellar performance, the share price slumped 15% in a single day on 12 June, despite another strong set of annual results. Revenue climbed 15% to a record £2.58bn, marking its 23rd consecutive year of record profit growth.
Investors focused instead on guidance that organic revenue growth would slow to low double digits. With the shares trading on a price-to-earnings ratio above 30, that was enough to trigger a sell-off.
The plus side is that Halma looks better value today, with its P/E down to just 20. That’s low by recent standards. I still think it’s well worth considering for long-term investors looking for a slow but steady compounder. And there are plenty more FTSE 100 stocks I’m keen to buy as the index shows what it’s made of.
Should you invest £5,000 in Halma Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
