Will the FTSE 100 climb in 2024? It has to some day, doesn’t it?
Surely all we need is peace in the Middle East and Ukraine, an end to Western/Chinese tension, falling inflation and interest rates, and renewed global growth… Hmm, well, maybe.
But seriously, when pessimism is at its darkest, that can often be a herald of better times. And I do see a number of positives.
Rising earnings
Footsie shares might be having a hard time in 2023. And earnings forecasts for the full year have been cut back in the past few months.
But, the City still expects pre-tax profits from the FTSE 100 to rise by 10% this year. That’s above even today’s inflation.
There’s some doubt in that, sure. Especially as mining earnings look a bit shaky this year. But plenty of sectors look like they could end the year on an upbeat note.
And broker forecasts suggest further growth in earnings, and dividends, in 2024.
Big dividends
Dividends, plus share buybacks, are very strong this year.
According to analysis by AJ Bell, FTSE 100 firms should deliver around £78bn in dividends in 2023. And we have nearly £47bn in buybacks already announced.
Total dividends should come close to an all-time record in 2024. And, with a bit of luck, could smash through it and set a new one in 2025.
A lot of today’s big yields might look a bit risky. But when I see a long-term dependable income stock like National Grid with a 5.6% yield, it almost looks like free money to me.
Even Unilever, known for steady rather than big dividends, is on 4%. And that’s about the Footsie average right now.
Cheap banks
I reckon banks, insurers and other financial stocks are some of 2023’s most attractive buys. And that covers some of my long-term favourite stocks.
The Legal & General dividend yield is up at 8.7% now. And forecasts show it set to grow further.
Looking at the banks, there’s a forecast 5.9% at Lloyds Banking Group. And the Barclays yield is at 5.5%. Both have been buying back their own shares this year, so they don’t appear to be short of cash.
Why do I think banks could be key to a new FTSE 100 bull run?
Well, finance underpins everything. And when the big investors see bank risks recede, I see a good chance they’ll buy back in. And that should boost general confidence.
2024, really?
I’m looking for reasons for optimism here, I admit. But that’s just me. And the reasons for pessimism are many and obvious.
If interest rates don’t start to come down in 2024, the whole stock market could look more wobbly.
I’m still bullish for 2024, though. And even if it takes longer for the Footsie to pick up, that’ll be good too.
It would give us more time to buy cheap shares, and lock in better long-term dividend yields. See, I told you I’m an optimist!
