Anyone fancy a guess at where the FTSE 100 might finish in 2024? It’s only a bit of a game, but a lot of us like to play along. I know I do.
Looking round at what the experts think, I’m seeing a fair bit more uncertainty this year than in recent years.
But I think it can help to look at predictions, and think about what they might imply.
Too precise
I see a couple of sites out there offering month-by-month predictions, down to the last digit, going years into the future. I think that’s just nonsense.
It seems a bit like starting a diet plan, and setting monthly weight loss targets down to the milligram.
There’s a very wide range of predicitions out there. Most are pretty conservative at this stage. And I think that’s wise, considering the opposing pulls between economic fears and low share valuations.
But some of them are quite optimistic.
The bull case
I’m not seeing lots of people pumping up the chances of the Footsie reaching 10,000 points in 2024. In previous years, that was more common. But a sharp dose of 2023 seems to have damped hopes like that.
The most upbeat I find is for around 9,000 points. What might that mean?
It would be a 20% gain. That sounds like a lot, but the index is on an price-to-earnings (P/E) ratio of only 11 now.
A 20% rise would take it to 13.2, which is still below the long-term average. And it’s in a year that could see dividends come close to the all-time record set in 2018.
Rising stocks
One thing against such a jump though, is that I see quite a few recovered stocks as being fully valued now.
So an overall 20% gain would need the more undervalued ones to climb by more than 20%. I do think some, like Barclays (with a P/E under five for 2024), might deserve a boost like that and more.
But I’m not seeing a one-fifth gain for the index, especially as some commentators expect shares to drop in the first half of the year.
No change?
At the other end of the scale, some think the stock market will be flat in 2024, or even fall. If we get the economic recession that some predict, it could happen.
A flat result wouldn’t be so bad. But I just see it as too gloomy.
Broker forecasts have been scaled back, but analysts still expect earnings and dividends to grow steadily in the next few years. And they could very soon be setting new all-time records.
Consensus
The general consensus seems to be a FTSE 100 of between 7,500 and 8,000 points by the end of 2024.
So that’s anything between no move at all, and a 6.7% rise. Based on the short-term uncertainty, I think we might well end up somewhere in that range.
But I’d say it greatly underestimates the long-term value of UK stocks right now.
I reckon 2024 could be another buyers’ paradise.
