The FTSE 100 had a solid year overall aided by the Labour party’s landslide victory in the general election, and the Bank of England starting to cut interest rates in what collectively helped boost UK stocks.
The UK’s blue-chip index is up 5.35% this year, after reaching an all-time high of 8,474.41 points in May.
While the index’s rise has been more subdued compared to the S&P 500’s nearly 25% year-to-date surge, 2024’s performance marks its strongest showing since 2021, when it surged 14.3%, following gains of 0.9% in 2022 and 3.8% in 2023.
What are investors thinking for FTSE 100 in 2025?
In a recent market outlook survey by broker Jefferies, two-thirds or more than 66% of the respondents thought the FTSE 100 would be higher by the end of 2025, up from just under 50% last year.
Only 8% expected the FTSE 100 to be lower, compared to 22% last year.
Institutional Investors were the biggest swing voters, from 27% fearing it would be lower in 2024, to just 9% thinking the same for 2025, demonstrating their optimism in the market outlook.
Could FTSE 100 hit 9,000 points?
According to brokerage AJ Bell, FTSE could hit 9,000 points by the end of 2025, a roughly 10% jump.
AJ Bell’s investment director Russ Mould says that the “prevailing gloom” has left UK equities appearing undervalued based on earnings and yield metrics.
“Political uncertainty should now be receding in the UK, given the Labour government’s thumping majority, and this offers a favourable comparison with Europe, where coalition administrations now seem to be falling over at a pace to match that of the Conservative Party’s enthusiastic sacking of its leaders, prime ministers, and chancellors in recent years,” Mould says, adding,
The jury may still be out on the new chancellor’s first Budget, but some credit should be given for at least acknowledging the fiscal deficit which faces the country, a topic barely mentioned during the US election campaign and one that is now coming home to roost in France.
UBS has pegged its 2025-year-end forecast for the FTSE 100 between 9,800-9,900, an outcome that will be dependent on higher commodity prices, better global growth, and weaker sterling.
Commodity sectors contribute around 25% of FTSE 100 earnings.
However, UBS’s most pessimistic scenario is of a retreat towards 6,600 and this might take place if persistently high inflation forces the Bank of England to hold rates higher for longer, putting downward pressure on equity valuations and the economic growth outlook.
UBS also said UK equity valuations are not as attractive as they first appear given the reliance on financials and energy at 8.4x and 8.1x respectively.
It sought to highlight that earnings in these sectors could be at risk from weak oil and gas prices as well as falling interest rates.
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