The FTSE 100: A Barometer of Risk-On Sentiment Ahead of Jackson Hole 2025

The FTSE 100 has long served as a barometer for global risk appetite, and its recent performance ahead of the Jackson Hole 2025 symposium underscores its role as a leading indicator of market sentiment. With the index trading near record highs and technical indicators flashing strong buy signals, investors are watching closely to see if this momentum can hold—or if the looming central bank decisions will trigger a correction.

Technical Momentum: A Bullish Foundation

The FTSE 100's technical profile is currently in a favorable position. Moving averages, a cornerstone of trend analysis, show a “strong buy” rating, with the 50-day and 200-day averages aligning in a bullish crossover. This suggests that the index is not only trending upward but doing so with institutional conviction. Meanwhile, the Relative Strength Index (RSI) and MACD oscillator indicate the index is neither overbought nor oversold, leaving room for further gains.

However, the chart isn't without cautionary signals. The index recently closed at 9,139 points, down 0.42% from its intraday high of 9,222.07. This pullback, while modest, hints at potential profit-taking. Investors should monitor the 9,000 level as a critical support zone. A break below this could trigger a short-term selloff, but the broader trend remains intact.

Sentiment Shifts: Bearish Shorts vs. Resilient Bulls

Despite the technical optimism, investor sentiment is a mixed bag. Retail traders, as tracked by IG, have 82% of positions short on the FTSE 100, reflecting a bearish bias. Yet, this short-term positioning contrasts with the index's year-to-date gain of 11.82% and a 50.06% rise over five years. The disconnect suggests that while near-term volatility is priced in, long-term fundamentals remain robust.

The Bank of England's recent 25-basis-point rate cut to 4.0% has added complexity. While the move was intended to stimulate growth, the Monetary Policy Committee's 5–4 split on the decision signals internal caution. This hesitancy could weigh on risk-on sentiment if inflationary pressures persist.

Jackson Hole 2025: The Fed's Role in Shaping Risk Appetite

The Jackson Hole symposium, scheduled for August 21–23, will be a pivotal event. Federal Reserve Chair Jerome Powell's speech on August 22 will likely dictate the next phase of global equity markets. If the Fed signals a September rate cut, it could amplify risk-on sentiment, pushing the FTSE 100 higher. Conversely, a delay in easing could trigger a selloff, particularly in sectors sensitive to interest rates, such as financials.

The UK's own inflation data adds another layer. With core CPI at 3.7% and headline inflation near 4.0%, the BoE's path of rate cuts remains uncertain. However, the global trend toward monetary easing—led by the Fed—could force the BoE to follow suit, providing a tailwind for the FTSE 100.

Sectoral Dynamics: Mining and Energy vs. Financials

The FTSE 100's performance is also shaped by sectoral divergences. Mining and energy stocks, including Anglo American and BP, have surged on strong commodity prices and global demand. These sectors are likely to benefit from a weaker dollar if the Fed cuts rates, further boosting the index.

In contrast, financials like Standard Chartered have underperformed due to regulatory scrutiny and higher funding costs. This divergence highlights the importance of stock-picking within the index. Investors should favor sectors with strong cash flows and geopolitical tailwinds while avoiding overleveraged names.

Strategic Takeaways for Investors

1. Position for a Post-Jackson Hole Rally: If the Fed signals rate cuts, the FTSE 100 could test its all-time high again. Use the current pullback as a buying opportunity in high-quality miners and energy plays.
2. Hedge Against Volatility: With 82% of retail positions short, consider hedging with defensive sectors like utilities or cash equivalents if the Fed disappoints.
3. Monitor the 9,000 Level: A break below this support could trigger a short-term selloff, but the index's long-term trend remains intact.

In conclusion, the FTSE 100 is a compelling proxy for risk-on sentiment, but its trajectory ahead of Jackson Hole depends on central bank actions and sectoral performance. While technical indicators and long-term fundamentals are bullish, short-term volatility is inevitable. Investors who balance optimism with caution—and keep a close eye on Powell's speech—will be well-positioned to capitalize on the coming weeks' opportunities.