FTSE 100 outlook amid potential tariff threat: what's next for the UK's leading index

​​​FTSE 100 recent market performance

The FTSE 100 has struggled to keep pace with its global counterparts, particularly US indices, over the past year. Nonetheless, the UK blue-chip index hit a record high of 8692 in late January.

​FTSE 100 versus peers one-year comparison chart

The rotation out of expensive US stocks, particularly as US dollar strength makes them more costly, has benefited both UK and European markets. This trend could continue to support FTSE 100 performance throughout 2025, potentially outperforming US stock indices such as the S&P 500 and Nasdaq 100 in the coming weeks and months.

​FTSE 100 versus peers year-to-date comparison chart

​Banking stocks started 2025 on a strong footing

The FTSE 100's traditional value tilt has been both a blessing and a curse. While it has meant missing out on the AI-driven rally that has powered US markets higher, it also provides some protection against potential growth stock corrections, as seen last week and again on Monday, when President Trump imposed 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods before agreeing to a 30-day pause on the 25% tariff.

Energy and mining companies, which form a substantial part of the FTSE 100, continue to benefit from relatively stable commodity prices. However, these sectors remain vulnerable to concerns about Chinese demand, global growth prospects, and President Trump’s policy decisions.

​Value proposition versus growth markets

The FTSE 100's traditional value tilt has been both a blessing and a curse. While it has meant missing out on the AI-driven rally that has powered US markets higher, it also provides some protection against potential growth stock corrections, as seen last week and again on Monday, when President Trump imposed 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods before agreeing to a 30-day pause on the 25% tariff.

Energy and mining companies, which form a substantial part of the FTSE 100, continue to benefit from relatively stable commodity prices. However, these sectors remain vulnerable to concerns about Chinese demand, global growth prospects, and President Trump’s policy decisions.

​Technical outlook and key levels

The FTSE 100, alongside its US and European peers, gapped lower on Monday morning amid President Trump’s tariffs on Canada, China, and Mexico before attempting to close these price gaps once a 30-day moratorium was put in place.

The subsequent rally in the FTSE 100 took it to 8623, not quite closing its daily chart price gap with Friday’s 8627 low. Therefore, the possibility of a breakaway gap being formed remains in play. Such a gap could denote a change in the medium-term trend from bullish to bearish.

The risk of at least an interim top forming remains high since the January peak has been accompanied by negative divergence on the daily Relative Strength Index (RSI), which did not confirm the late January high as it made a lower high on the oscillator. Such negative divergence more often than not points to at least a short-term correction in the trend. In some cases, it even precedes a major trend reversal.

Immediate support sits between Monday’s 8509 and the 8478 May 2024 peak. While it underpins, the December-to-January uptrend remains intact.

Closure of the 8627 – 8623 price gap would probably indicate that buyers continue to find the FTSE 100 attractive, with a new all-time high at 8700 and above likely to be on the cards. Such an advance may lead to the psychological 9000 mark being reached in the course of 2025.

Were the 8509 – 8478 support area to give way, the next lower key 8426 – 8364 support zone, a previous resistance area, may be revisited. The medium-term bullish outlook will stay intact as long as the FTSE 100 remains above its June 2024 high at 8364.

​FTSE 100 daily candlestick chart

​Market catalysts ahead

The FTSE 100 maintains its position as one of the highest-yielding major indices globally. Share dealing investors continue to find value in the index's consistent dividend payments, particularly in the current environment.

Many constituents have strong dividend coverage ratios and healthy balance sheets, suggesting potential for continued shareholder returns despite economic uncertainties.

​Several factors could influence the FTSE 100's performance in the coming months

• Bank of England monetary policy decisions
• Corporate earnings momentum
• Possible US tariffs on UK goods
• Global economic growth outlook
• Chinese economic recovery
• Relative strength of sterling