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It’s easy to fold when you come back FTSE 100 in 2024 compared to S&P 500. But I don’t think it’s too bad considering everything UK investors have had to deal with.
Combined year
We had good news, of course. Inflation has returned to the 2% Bank of England target it set in May. The clear result of the July national election was also considered positive, especially given the political instability in other nations.
On the other hand, anxiety in the weeks leading up to October’s calamitous first Budget from Chancellor Rachel Reeves prompted many to sell assets early. The lack of new company listings (and the increasing number of people looking to move to the US) didn’t bode well. London Stock Exchange in the best light or.
But some believe the FTSE 100 could be set for a bright 2025. AJ Bell Investment Director Russ Mold thinks the index could reach 9,000 by the end of the year.
It’s still like that
Another reason is good old-fashioned value. UK stocks still look cheap compared to other countries and, in Mould’s view, “buying cheap, rather than taking reckless risks, is often the best way to get good long-term returns“.
As a proof of this, he is pulling on a tech titan an apple. Analysts have the US giant generating £87bn in revenue by 2025. That “little by little” what companies in the FTSE 100 are expected to do collectively. And yet the iPhone maker is more important than us complete the guide alone!
By Mould’s calculations, the FTSE 100 would still only trade at a price-to-earnings (P/E) ratio of 13.3 to 9,000. There will also be a dividend yield of 3.6% on the returnable juice.
What could go wrong?
Obviously, this result is not guaranteed. Indeed, Mr Mold believes that “any divergence from the expected macroeconomic path of cooling inflation, modest economic growth and falling interest rates” could put pressure on UK share prices. By hiring a home builder Persimmon (LSE: PSN), I sincerely hope this situation does not play out.
Although I have done well for most of 2024, my position has suffered in recent months following inflation. Despite expectations, these pushed the Bank of England to warn that the pace of rate cuts could slow in 2025.
That is not good for potential property buyers. It is yet another blow to a company like Persimmon which is already facing higher costs due to increased National Insurance and new building regulations.
At least there is a 5.5% weather yield to get me through. For now, this looks safe.
Who cares about 2025?
Ultimately, no one knows where the FTSE 100 or any other index will go next year or any other year. For this reason, I’m taking Mould’s target as an educated guess (as I’m sure he intended). I would say the same to anyone who suggests that our stock market is going to crash.
Given this, my strategy will not change one iota. I will continue to pump the rest of my money into the UK market – and elsewhere – for the simple reason that I don’t plan to touch it again for decades. That is the only time horizon that matters to this Fool.
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