FTSE 100 on the Brink: Autumn Budget Could Cut Short Its Stunning Rally

The UK's blue-chip index, the FTSE 100, has had an exceptional start to 2025, but all eyes are now on the Autumn Budget , set to be announced by Chancellor Rachel Reeves on 26 November. Many analysts believe the Budget could include significant tax hikes and policy shifts that might derail the index's momentum.

A Record-Breaking Year for the FTSE 100

As of 31 October, the FTSE 100 closed at 9,787 points — a new record high. The index, comprising the 100 largest companies listed on the London Stock Exchange (LSE), has defied global market trends, which have been marked by volatility amid inflation concerns and geopolitical tensions.

Unlike previous years, where rate cuts by the Bank of England (BOE) often signalled economic easing, this year's monetary policy has been characterised by a cautious approach. The BOE has only made three rate cuts so far, and despite expectations of a further reduction, the outlook remains uncertain.

Interest Rates and Market Resilience

The Bank of England's Monetary Policy Committee (MPC) is scheduled to meet on 6 November, with many market analysts predicting a 0.25% rate cut from 4% to 3.75%. The rationale for this move stems from stabilising inflation — which showed no significant spike in September — and a slowdown in job openings.

Major banks such as Barclays and Goldman Sachs have indicated that a rate cut would be welcomed by mortgage borrowers, though the probability remains low. The current environment suggests that while the FTSE 100 has held steady, any change in monetary policy could influence investor sentiment in the coming weeks.

Leading Stocks and Sector Performances

Among the best performers this year, Fresnillo, a major player in the basic materials sector, has surged by an incredible 278.7% since the end of 2024. Telco giant Airtel has also shown remarkable growth, up 147.5%, while industrial conglomerate Babcock International has risen 143.5%.

Financial services firms continue to be a key driver. Prudential, with a market value of £27.5 billion, is attracting attention from growth investors. The company's focus on health insurance, pensions, and investments across Asia and Africa positions it well for the emerging middle-class boom in those regions.

Investors Eyeing Future Growth

Sarah Coles, head of Personal Finance at Hargreaves Lansdown, remains optimistic. She hopes the Autumn Budget will make life easier for savers and investors, advocating for more accessible financial advice without fees.

AI and Tech Sector: Opportunities and Risks

The US tech giants — particularly the so-called Magnificent Seven — have announced aggressive investments in artificial intelligence (AI) this year and into 2026. However, the FTSE 100 has limited exposure to this sector, with only six stocks classified under telecoms and technology.

One notable investment is Scott Mortgage Investment Trust, a £27.5 billion closed-ended fund specialising in AI, cloud computing, and semiconductors. Its portfolio includes giants like Amazon, Meta, NVIDIA, and Netflix. While the AI bubble poses risks, diversification should help cushion potential shocks.

Rebound from Tariffs and Market Resilience

Earlier in 2025, the FTSE 100 faced a setback after the Trump administration announced tariffs in April, causing a nearly 5% drop. Nonetheless, the index quickly recovered, completing 15 consecutive days of gains in May — a record not seen since January 2017.

Looking Ahead: The 10,000 Milestone

With the resilience demonstrated throughout the year, the FTSE 100 appears on track to surpass 10,000 points by year-end. Despite uncertainties surrounding the Autumn Budget, the index's strong performance suggests it could achieve further record highs.

However, any negative reaction to the Budget could serve as a headwind, potentially preventing the index from finishing the year on a high note. Investors remain watchful, awaiting the Chancellor's announcements that could influence the UK's economic outlook and the FTSE's future trajectory.

Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional guidance before investing. Remember, investments are subject to market risks, and past performance does not guarantee future results.