No one really knows what the FTSE 100 (INDEXFTSE: UKX) will do this year, although this hasn’t stopped the City’s top analysts trying to put a number on the level at which they believe the index will finish the year.
All of the analysts’ forecasts are relativity upbeat. Most predict that the FTSE 100 will surge to a record high during 2015, charging through the key level of 7,000 and pushing towards 8,000.
Morgan Stanley has one of the most pessimistic targets. Its analysts believe that the FTSE 100 will end 2015 no higher than 7,200. The bank believes that foreign exchange headwinds from the pound and US dollar, as well as political risk around the general election, will cause buyers to think twice about putting their cash to work here in the UK.
Meanwhile, Barclays has a more optimistic outlook, with a year-end FTSE target of 7,300. Citigroup has the most positive outlook, predicting that the FTSE 100 will end the year at a record 7,700.
To come up with this figure, Citigroup’s analysts focused on the fact that UK plc is expected to deliver 5-10% earnings growth in 2015-16. Additionally, Citigroup’s analysts have noted a global pick-up in mergers and acquisitions activity, which the FTSE 100 will benefit from.
Not to be trusted
However, while the City’s top analysts believe that the FTSE will end 2015 at a record high, there are plenty of reasons to be sceptical of these forecasts. These estimates should never be relied upon, as in the past they have turned out to be extremely unreliable!
For example, last year analysts were predicting that the FTSE 100 would end 2014 at similar levels to those predicted for this year. Specifically, Barclays was expecting the FTSE 100 index to end 2014 at a record level of 7,400, Citigroup’s analysts had pencilled in a year-end level of 8,000 and Morgan Stanley’s figures suggested the index would end the year at 7,220.
All of these forecasts turned out to be way off the mark. The index ended the year at 6,566 — that’s a staggering 18% below Citigroup’s target.
What’s more, there are signs that the FTSE 100 could actually be gearing up for a sudden move downward.
About to fall?
Last week, The Motley Fool published an article highlighting the fact that the market seems to be in the final stages of a bull market, and that the warning signs of an impending market crash are starting to flash. These three signs included the sudden increase in volatility, following a period of calm, the falling price of copper and investors’ exceptionally high level of optimism.
But in reality, not even the world’s top economists or City analysts can accurately predict where the market will be in a year’s time.
There are many reasons why the market could suddenly decide to take a dive, or rally to a new high. Trying to time the market often results in failure and can cost you a lot of money.
