2024 has been a terrific year so far for the FTSE 100. The UK’s flagship index is up by double digits after including dividends. And with inflation only a few points away from falling in line with economic targets, businesses are starting to thrive again.
We’ve already seen impressive growth figures start to emerge from leading businesses like AstraZeneca, Rolls-Royce, and Compass Group (LSE:CPG), among others. And providing the macroeconomic landscape continues to improve, some analyst forecasts have become increasingly bullish.
In fact, there’s a chance the FTSE 100 could reach 10,000 points this time next year! But it may not, of course.
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Hitting a new high
According to the latest outlook from The Economy Forecast Agency, the FTSE 100’s expected to reach as high as 9,907 by December. But this upward trajectory may continue breaking through the 10,000 point threshold for the first time in history as early as February 2025.
If that turns out to be the case, then investors may be set to enjoy yet another bout of double-digit growth. After all, compared to today’s level of around 8,200, that’s a 22% increase.
Of course, investors should always take forecasts with a pinch of salt. There are a lot of assumptions that go into these figures, and a lot has to go right in order for the FTSE 100 to break a new record.
It’s worth pointing out that 10,000 is the most optimistic forecast, with 8,854 the least. That still signals potential growth, but investors may end up with considerably less than expected.
Nevertheless, this bullish prediction is a welcome sight, given the pessimistic nature of the stock market over the last few years. There’s no guarantee of what will happen over the next 12 months. But interest rate cuts could provide a powerful catalyst for sparking share price growth, especially given that so many stocks continue to trade at relatively cheap multiples.
What to buy?
Now that we’re seemingly at the start of a new bull market, snapping up terrific companies at a good price could lead to immense wealth creation in the long run. That’s especially true if it ends up lasting as long as the last one. And the first place I’d start my search is actually among the companies that are already delivering.
Take Compass Group as an example. The contract caterer recently published its interim results, which once again displayed double-digit sales and earnings growth. As such, profits came in higher than expected, and management’s outlook suggests this trend will continue throughout the rest of 2024.
Despite this encouraging turn of events, the shares are still flat compared to a year ago. There may be some cause for concern given that capital expenditures have increased as a proportion of revenue, placing pressure on profit margins. Yet that hasn’t stopped operating profitability from returning to near-pre-pandemic levels. So it’s a firm that merits a closer look, to my mind.
