It’s that time of year when the pundits are speculating on where the FTSE 100 might go next year. They’re all out with their guesswork machinery going into overdrive.
Year-end predictions should, of course, be taken with a great deal of scepticism. But who can ignore the temptation to see what they say?
To recap 2024, the FTSE 100 is up around 6.5% so far with a month to go. It’s still down from its 52-week peak of 8,474 points set in May, but it seems to be holding above 8,000 points.
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It’s sobering to think the index looked like breaking through 8,000 any day now… back in late 2019.
Eyes forward
That 6.5% year-to-date gain is close to the average annual FTSE 100 returns of the past 20 years of 6.9%. Oh, but that’s total returns. So if we add 4% for dividends, which is about where the index yield would have been at the start of the year, we could have a very nice total of 10.5%.
Another 6.5% Footsie rise in the course of the next 13 months could put us at around 8,780 points by the end of December 2025.
UBS reckons the FTSE 100 could end 2025 as high as 9,900 points. And that’s easily within a bit of random fluctuation of the psychologically important 10,000 level. Then again, the global wealth manager sees a pessimistic possibility as low as 6,600.
Breaking 10,000?
The Economic Forecast Agency uses what it describes as “mathematical and statistical methods of prediction based on the existing historical data“, plus lots of other factors.
And it has a December 2025 target of around 9,500 points. But it thinks the index could, at least temporarily, exceed 10,000 in November or December.
What do I think? I don’t have any fancy computer models to drive my thoughts. So never mind forecasting, how do I plan to make the most of any 2025 market gains?
Buy the best
I think a well-chosen investment trust could give me the best chance of beating the index. And my biggest purchase in 2025 is likely to be more of my favourite, City of London Investment Trust (LSE: CTY).
It’s lagged the FTSE 100 this year, but with a better dividend yield at 4.8%. According to AJ Bell‘s latest survey, there’s a consensus of 4% for the FTSE 100 overall in 2025, which supports my hopes.
Finance makes up 30% of its portfolio. Consumer staples come in at 21%, and 12% is in industrials. With 9% in energy, and 8% in healthcare, I think that’s well diversified. And it’s largely representative of the main drivers of the FTSE 100.
Beating the FTSE
It’s still riskier than buying an index tracker. And if its unroken run of 58 years of dividend rises should falter, I could see a share price hit — worse than the past few years of going nowhere.
But if the FTSE 100 does get close to 10,000 points, I reckon I must have a good chance of doing well.
