Over the past year, the FTSE 100 has done very well. It’s up 15%, and from where I’m standing, I’d happily take a 15% return each year. However, things aren’t that simple, and neither is the outlook through to the end of the year. With a host of risks facing investors, it’s hard to predict a path. I sought a second opinion from my AI friend ChatGPT, and this is what it said.

Quite optimistic

The chatbot gave me a year-end forecast of 11,350 points. For perspective, the FTSE 100 is trading around 10,700 points at the moment. So that’s over a 6% return in three months, on top of the run we’ve already had this year. I like to be optimistic, but that seems quite a surprising answer.

When I asked for the reasoning, it said the earnings backdrop for FTSE 100 stocks remains supportive. Current estimates for the broader UK market point to roughly 11% annual earnings growth over the next few years. Even so, I struggle to see that translating into such a large index-level gain in the coming months.

Another factor is that the FTSE is well positioned for the current macro environment. Oil above $100 is painful for the UK economy, but the FTSE 100 isn’t the UK economy. BP and Shell benefit from higher energy prices, while miners, banks and defence companies make up another substantial part of the index. So even though there are risks, the index could be less affected than people might think.

Tempering the enthusiasm

To be clear, I don’t think the index is due a steep fall between now and Christmas. But I don’t think we’ll see it break meaningfully above 11,000 points. My main concern is that the Bank of England’s interest rate hikes to stem rising inflation will hurt more stocks than they help. So I believe the FTSE 100 will finish the year around the same level it’s at now.

This doesn’t mean some shares can’t do well. For example, higher interest rates should help NatWest Group (LSE:NWG). The stock is already up 33% in the past year, but I think it could continue. In my view, one reason investors have warmed to the FTSE 100 bank is that the prospect of interest rates staying higher for longer could continue supporting earnings.

NatWest makes money from the difference between what it earns on loans and what it pays depositors. Higher rates can widen this spread. NatWest’s numbers demonstrate the effect nicely. Net interest income rose 12.6% year on year to £6.9bn in the first half of 2026, while its net interest margin increased from 2.28% to 2.48%.

Therefore, with higher rates, NatWest could earn more from its large deposit base than investors previously expected.

But rates aren’t the only reason I’m positive. H1 operating profit jumped 20% to £4.3bn. Management subsequently upgraded its 2026 income guidance to around £17.9bn and announced a 12p interim dividend, 26% higher year on year.

There are risks, though. Higher rates are beneficial only up to a point. If borrowing costs squeeze households and businesses too severely, mortgage demand could weaken and loan defaults could increase. Yet on balance, it’s a stock I think investors could consider if they want exposure to this theme.

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Jon Smith has no positions in the shares mentioned.