Can the FTSE 100 hit 9,000 in 2024?

The FTSE 100 has underperformed its international peers since 2016. So, why might 2024 be a better year for UK-focused investors?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young mixed-race woman jumping for joy in a park with confetti falling around her

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

After several disappointing years, investors might be asking themselves why should they put their money in the FTSE 100 again. After all, managers and investors alike have been pulling their money from the blue-chip index.

So, what wrong with the index, and could things change in 2024?

What’s wrong with the FTSE 100?

Investors have been pulling money out of the index due to several reasons, but it largely revolves around a lack of growth, momentum, and too much debt.

Not all of the index’s problems are systemic. The Brexit referendum created uncertainty, and this uncertainty was unfortunately sustained by the Covid-19 pandemic, and an imperfect split from the European Union.

In turn, we had poor levels of economic growth, and that’s reflected in fairly unexciting earnings growth. And amid this low growth, low interest (investor interest) environment, we’re seeing less stock listing activity.

It’s a vicious circle.

Could things be changing?

Despite all of these issues, the UK represents a fundamentally strong place to invest.

Just take this; there are plenty of elections scheduled across the world this year — 69 if my memory serves me correctly — and UK will likely be one of them. But how many on them will be fought by and won by centrist parties?

The UK is one of just a few states whereby the three frontrunners have moderate, on a relative scale, economic policies. And that’s great for investors and businesses. We don’t want volatility.

It’s also worth noting the FTSE 350 has posted a positive return in eight of the last nine election years. The average return has been 9.1%.

Moreover, in 2024, we’re expecting the start of an easing monetary policy. In fact, interest rates could fall as much as 300 basis points over the next three years.

So, why is that positive? Well, as interest rates fall, investors tend to move their attention away from cash and bonds towards stocks, in turn pushing share prices upwards.

It’s actually a bigger deal than many people recognise. With government bonds yielding 5%, investors likely avoid FTSE dividend stocks, which may also yield 5%, but carry greater risk. But as interest rates fall, the equation changes.

And finally, following years of economic underperformance, the UK is actually expected to be the strongest performing in Europe over the next 15 years, according to some forecasts.

FTSE forecasts

This optimism is reflected in the Economic Forecast Agency’s predictions for 2024 and 2025. As we can see below, the agency expects the FTSE 100 to gain throughout the year. Even the lower end of the forecast represents a considerable advance on the current position.

And according to the agency, the FTSE 100 could feasibly hit 9,000 towards the end of the year. But this represents one of the most optimistic outcomes for the year.

What would that look like in practical terms? It would likely only be achieved if the economy experiences a soft landing, inflation cools as expected, and interest rates fall earlier than the current consensus.

Source: Economic Forecast Agency

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Dividend Shares

Is a Bank of England rate cut good for the Lloyds share price?

Ken Hall analyses what the latest interest rate cut could mean for the Lloyds share price with the UK bank’s…

Read more »

Investing Articles

2 brilliant bargains I’m considering for my Stocks and Shares ISA!

These FTSE 100 and FTSE 250 shares offer exceptional value on paper. Here's why I'm considering them for my Stocks…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Dividend Shares

How much passive income could I generate with just £10 per day?

Ken Hall wants to create his £10,000 yearly passive income dream by investing just £10 every weekday day in Footsie…

Read more »

Investing Articles

Is the Rolls-Royce share price too high? Here’s what the experts say

The Rolls-Royce share price has surged over two years, representing one of the FTSE 100’s greatest success stories. But is…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

A top S&P 500 growth share and an ETF I’d buy this November!

I think this S&P 500 share and exchange-traded fund (ETF) could be brilliant additions to my ISA or SIPP right…

Read more »

US Stock

Here are the best-performing S&P 500 stocks after the US election result

Jon Smith notes some of the largest gainers from the S&P 500 yesterday and explains how the election result has…

Read more »

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »