The FTSE 100‘s up 12% since the start of January, including dividends. Yet if the analyst forecasts are correct, the UK’s flagship index could have a lot further to travel.
With economic and political uncertainty slowly subsiding, 2025’s looking increasingly promising for business. This is especially true for sectors that have been hit hard by weakened consumer discretionary and public spending. So it’s not surprising that analysts are bullish for the future. In fact, if everything goes according to plan, the FTSE 100 might even surpass the coveted 10,000-point threshold for the first time ever!
What do the forecasts say?
The latest predictions from The Economy Forecast Agency are clear – the stock market’s going up in 2025. Is this a guarantee? Of course not.
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Stock market forecasts have their limits in predictive power due to their reliance on key assumptions. In fact, most of the time, share price and index predictions prove themselves to be wrong. That’s why it’s prudent to take predictions with a healthy dose of scepticism.
Nevertheless, they can be a powerful tool in judging investor sentiment. So compared to its current level of 8,312 points, where could the FTSE 100 end up by this time next year?
| Opinion | FTSE 100 Forecast | Potential Gain |
| Pessimistic | 9,030 | +8.6% |
| Average | 9,710 | +16.8% |
| Optimistic | 10,390 | +25.0% |
Even in the worst-case scenario, the FTSE 100 appears to be on track to stay slightly ahead of its long-term historical average of 8%. And that’s even before factoring the extra returns from dividends into the equation.
But should economic conditions improve at an accelerating pace, index investors might be rewarded with some pretty jaw-dropping returns that push the FTSE 100 to record highs.
Time to buy FTSE 100 stocks?
Just because an index has the potential to go through the roof doesn’t mean all of its constituents will follow. Therefore, stock pickers will have some extra work to do to filter out the winners from the duds.
One area of potential interest is the UK homebuilders. With government policy pushing for 1.5 million next homes to be built over the next five years along with mortgage rates tumbling, companies like Persimmon (LSE:PSN) should have little trouble developing their landbanks. And with shares sliding by almost 30% over the last couple of months, the stock’s trading near its 52-week low.
If everything goes according to plan, that creates a potentially lucrative inflexion point as homebuilding activity starts ramping up.
But at the same time, even with a supportive government, Persimmon, along with its rivals, may not be stellar performers next year. The UK has a significant shortage of skilled tradesmen needed to build homes, resulting in slow construction times. And it’s also worth pointing out that previous homebuilding targets set by previous governments have all missed the deadline.
Therefore, as with any potential investment, investors need to weigh the risks against the potential rewards when considering buying a stock.
