Shares hit a nine-month high yesterday on hopes that the roll-out of the coronavirus vaccine will help business bounce back.
In a major boost for savers with pensions and other investments, the FTSE 100 rose nearly 1 per cent to 6550.23, a level last seen on March 5.
That was before the UK was plunged into lockdown and businesses were forced to operate under heavy restrictions or close completely.
The latest rise took gains since the start of November to more than 17 per cent - a rally that has added almost £250billion to the value of Britain's blue-chip companies.
Shares hit a nine-month high yesterday amid hopes that the coronavirus vaccine will help business bounce back
PAST WEEK: The FTSE 100 rose nearly 1 per cent to 6550.23, a level last seen on March 5
PAST YEAR: The FTSE plunged in March this year as the coronavirus pandemic escalated
The gains are a big boost for UK savers and investors and brokers predict more good news to come on the financial markets before Christmas - the so-called 'Santa Rally'.
Neil Wilson, analyst at Markets.com, said: 'There certainly could be a Santa Rally. If you think vaccines are coming then the FTSE 100 should be back at 7700, the level it was at in January.
'One month from now the most vulnerable people could be vaccinated and hospitalisations might fall off a cliff.
'That would mean no travel restrictions and people start to book summer holidays and dividends rolling back in.'
In a further boost to sentiment, US investment bank Goldman Sachs said the UK economy looks set to race back to health over the next 18 months as the country recovers from coronavirus.
According to Goldman, a Brexit deal and a fast rollout of the vaccine means the UK is set for a sharp rebound.
The US bank predicts that the economy will return to pre-Covid levels in first half of 2022, quicker than Chancellor Rishi Sunak's estimates last week in the Spending Review.
That puts the UK ahead of Spain and on a par with Italy, but behind France and Germany according to Goldman's calculations.
US investment bank Goldman Sachs said a Brexit deal and a fast rollout of the vaccine means the UK is set for a sharp rebound
Goldman said: 'The UK is planning to deliver the vaccines more quickly than other countries and we estimate that the UK will vaccinate 50 per cent of the population by March. Given the likelihood of a Brexit deal, we see significant upside to UK domestic stocks.'
It added that the Government's decision to extend the furlough scheme until April and spend money on 'levelling up' the economy in the North would also support growth.
However Goldman did warn that the UK economy was likely to suffer some scarring with many jobs in the dominant services sector likely to disappear for good, meaning more money will have to be spent on retraining.
'A degree of skills mismatch in the labour market is also likely to weigh on the supply of labour in coming years,' the bank said. 'Some scarring seems unavoidable.'