2014 Predictions – Part 4: FTSE

FTSE 100
2013 Prediction: end the year 6300 – 6,000
2013 Close: 6749 (up 14.4%)
2014: 7300-7500

Always the most difficult to predict given recent volatility across the globe, again the sentiment behind our predictions were on the right lines though perhaps a little cautious as it turned out.

Many of last year’s forecasters believed correctly that it would be a bumper year for equities and there was cause for some celebration at the close of trading at the end of the year, with the FTSE now a mere 200 points off the record 6930.2 achieved during the dotcom boom in 1999.

As many investors looked for bigger returns in equities markets due to interest rates elsewhere being kept low by Government stimulus packages, only 16 stocks ended the year negative, mainly in the mining sector.

Of course it has been a year of ups and downs with the now usual playground antics of US politicians engaging in more “Fiscal Cliff” brinkmanship that threatened carnage across the Globe and seemed to seriously harm Republican support across the pond.

That aside, there was a moment of breath holding when the US announced it was finally beginning to reign back its monetary easing programme by “tapering”, but the markets were expecting this and with a commitment to keep rates low for a while yet, there is still room for further gains.

There are many who now believe that breaking the 7000 level is now only a matter of time and 2014 will be the year it happens, even rocketing further towards the 8000 level.

As the Index marks its 30th anniversary on 3rd January, only 19 of the companies on the list today were there at the outset.

The most bullish call for 2014 has come from Citigroup who say that the FTSE will break the 8000 level, whilst Goldman Sachs earlier in the year said that the 7200 level would be breached by the end of 2014.

Of course there are counter-views to this, with one respected Fund Manager, Neil Woodford, expecting a stock market slowdown as the US reins in its QE policy further.

However, Rob Gill, director of Coreco Wealth agrees with our bullish prognosis saying, “While 2013 was a good year in absolute terms for the FTSE 100 with growth of 14%, the UK blue chip index was a laggard in global terms. The US Dow Jones and Germany’s DAX index closed the year up 27% and 26% respectively, while even more troubled Eurozone countries such as the CAC40 in France and Italy’s MIB outperformed the FTSE with both managing growth of 17%.

“With this in mind, coupled with the improving prospects for both the global and UK economies, a rise of 10% plus for the FTSE 100 in 2014 seems far from unreasonable and thus a year end closing target of 7560.”

Overall then, whilst we will no doubt see another interesting year, we should see the index hitting record highs and heading towards the 7500 figure. Ceterus paribus of course!

Summary

In summary, 2014 looks to be a year of growth and something positive to look forward to. As long as house prices do not run away with themselves and politicians can keep their cool there is much to welcome.

The challenge will be how we wean ourselves off all the global stimulus put in place and what effect this has, as well as looking forward to see how we will cope with interest rates finally rising in the next 18 months or so.

These predictions are meant to be a guide, the sentiment more important than hitting the nail on the head. With a multitude of unknowns and worldwide events that can change the economic landscape, luck plays its part just as much as sound judgement.

To paraphrase a quote I heard recently about house price predictions, “there are two types of expert when it comes to predicting house prices – those who don’t know and those who don’t know they don’t know”.

On previous year’s evidence we seem to be more accurate than many however, but as ever, time will tell.

Best wishes to you all, 2014 is going to fly.

Monty

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