The UK’s headline stock market index, the FTSE 100, is not in a bad place. It has made gains for the second week straight. They are not the biggest gains ever, but it is about 1% up on average from last week.
Why the FTSE 100 index can pick up speed
I think there is a chance that the FTSE 100 index can pick up speed during June. The UK opens up fully later this month. If all things go as planned, travel-related stocks will benefit, I reckon. These include airline stock International Consolidated Airlines Group (IAG), and hotel stocks InterContinental Hotels Group and Whitbread.
Pandemic-affected stocks are particularly sensitive to news flow at this time. Just consider the almost 6% drop in the IAG stock since earlier this week when travel to and from Portugal was stopped. I reckon the converse can happen too.
As an aside, though, I think FTSE 250 stocks are more likely to gain. Not only does the index cover more UK-centric companies, it also covers more stocks that have suffered during the corona crisis. These include pubs and restaurants as well as other airline stocks.
But we need to wait and watch what happens next here. It is possible that the final stage of the lockdown may not be extended, which could dampen market sentiment.
Lack of updates can make a quiet June
This month is also quiet in terms of FTSE 100 company updates. Stock prices have a tendency to rise on good results. And in the recent past many updates are improving. Compared to last year, the numbers look better anyway.
Also, companies whose businesses have reopened have got a boost. One of them is the FTSE 100 retailer NEXT, which just increased its profit guidance. Luxury brand and retailer Burberry, too, posted encouraging results. Also, policy support has buoyed results. Real estate companies like Taylor Wimpey, Barratt Developments, and Persimmon have benefited from the stamp duty holiday.
Even if there are no positive updates, I gain some comfort from the fact that there are no negatives either. Stocks of healthcare companies and e-commerce-related stocks like delivery companies, warehousers, and packaging providers can see some softening in results in the near future as the lockdown is lifted.
Fear of inflation
Next, I think high inflation numbers can spook the markets too, as we have seen last month. While price rises have been particularly glaring in the US, which is a market for a number of FTSE 100 companies, inflation in the UK is rising too.
On the whole, I am cautiously positive for the FTSE 100 in June. The final easing of lockdown can make the stock market rally. But that will happen only in the final 10 days of the month. Uncertainty, lack of company updates, and inflation numbers can pull the average number down. Either way, I doubt that it will be a once-in-a-lifetime opportunity to buy or sell stocks. I continue to base my investments on fundamentals of companies and the economy.
The post Will the FTSE 100 index rise in June? appeared first on The Motley Fool UK.
Manika Premsingh owns shares of Burberry. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Burberry and InterContinental Hotels Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021