Record highs on the UK 100 by year end?

The UK’s blue chip stock index has delivered exceptional trading opportunities to date in 2016 and the trend looks set to continue. While the index has edged back towards fresh all-time highs above 7000, even accelerating after the June Brexit vote, it remains about 300pts from the record highs of May 2015 – this as US stock indices are breaking their own records.

The uptrend has been checked somewhat by a corresponding uptrend in UK macro data. This seems counterintuitive, but signs that the UK’s economic outlook is improving unexpectedly are sure to push down expectations that the Bank of England will ease policy further. This in turn gives us a major reason for UK markets being up in the first place: Stimulus hopes – or more generally, central banks. Is this sustainable?

Thankfully, optimism remains with bulls appeased by the continued divergence in monetary policy between US and European central banks. Even if we don’t get any more goodies from the BoE, we can find comfort in the US Fed’s desperation to raise US interest rates. That means the USD will still strengthen to the detriment of the GBP and those all-important FX translation benefits could continue to underpin the UK 100 ’s recovery – could this be the dip on which to buy Tobacco and Oil stocks?

With the focus shifted from rate cuts to rate hikes, it’d be downright irresponsible to ignore the banks and financials at this point. The UK’s banks took a little hit when the BoE cut rates but they were thrown a rubber ring in the Funding for Lending Scheme. One UK blue chip Bank has plenty of US exposure. Higher interest rates could benefit financials – if we get them in the US.

The other sector that’s been in focus is, of course, property. UK House Builders have had a rough time of it after everyone said prices would tank by 20% in the event of Brexit. But considering that everyone also talks about ‘huge’ demand for houses – Brexit or no Brexit – it’s funny that those that control supply should be at all worried, especially since house price growth has accelerated in August, 2 months after the vote. Prices rise when demand outstrips supply. So, everyone’s racing to buy a house before prices fall are they?

If a selloff has ever been overdone, it could well have been this one.

Can the UK 100 regain 7100 by year end for returns of 4%? If it can, which stocks are going to give it the get up and go to get there?!

In this report we look at five key stocks to watch. There’s a Defensive, an Oil Major, a Bank, a Retailer and a House Builder. Which will drive the Index back to its all-time highs? Or will they all play just as important a part in the relief rally?

Read on to find out!