FTSE will reach new record in 2015, predict City experts

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They were over-optimistic about the stock market in 2014 but, undaunted, City strategists are predicting the FTSE 100 will finally hit a new peak next year despite worries about the UK general election.

The leading index is currently at 6562, down 2.77% on the year so far, its first annual fall since 2011. And for the first time since 2002, the index will not see a rise during December.

Most City experts, however, were expecting the index to beat its all time closing high of 6930 by the end of 2014, and although it came close a couple of times that never happened.

Now they think that record will be broken next year.

Morgan Stanley has a December 2015 target for the FTSE 100 of 7200, but says the UK will continue to lag behind other markets:

We see four reasons why the UK will continue to underperform: a) weaker 2015 estimated earnings per share growth (4% in the UK versus 10% in Europe); b) average valuations; c) foreign exchange headwinds from the pound and US dollar; d) political risk around the general election.

Barclays meanwhile has a year end FTSE target of 7300, while Citigroup goes higher with 7700, saying:

[It is] hard to be that bullish based on earnings alone with three consecutive years of negative earnings growth in the bag and commodity downgrades threatening to take 2015 estimated earnings growth negative. But: 1) ex-commodities, UK plc expected to deliver 5-10% earnings growth in 2015-16, 2) commodity stocks are more about dividend payments than earnings growth, and 3) global pick-up in M&A/corporate actions can drive additional re- rating.

We stick with our end-2015 FTSE 100 target of 7700. UK shares look cheap versus rest of world and versus credit/bonds.

As a reminder Barclays was expecting the FTSE 100 index to end 2014 at a record level of 7400, Citigroup was looking for 8000 and Morgan Stanley forecasting 7220 so they have all empered their optimism a little this time around.

Powered by Guardian.co.ukThis article was written by Nick Fletcher, for theguardian.com on Wednesday 31st December 2014 11.29 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010


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