2024 has been a solid year for the stock market. In the US, the S&P 500 has regularly broken all-time highs. It’s up 27.25% so far this year, with dividends on top.
The FTSE 100 is up 7.08% so far. The trailing yield of 3.58% lifts the total return above 10%. By contrast, the S&P 500 yields just 1.18%.
The UK market started 2024 brightly, but slowed in the second half of the year. While July’s election brought political stability, October’s Budget cast a shadow over our growth prospects.
Can the FTSE 100 do better next year?
It’s a different story in the US, where markets went gangbusters after the election, thanks to the so-called Trump bump.
While President-elect Donald Trump’s pledge to slash corporate taxes and red tape should boost markets, much of the excitement is now priced in. The S&P 500 looks expensive trading with a price-to-earnings (P/E) ratio of 30.9. The FTSE 100 is roughly half that, at around 15.5 times earnings.
I prefer to buy individual FTSE 100 stocks rather than track the index and while I’ve done well I’ve had the odd failure too.
I had high hopes for trainer and athleisurewear specialist JD Sports Fashion (LSE: JD) when I bought it on 22 January. Its shares had just plunged after the board issued a profit warning following a poor Christmas trading period.
The JD Sports share price quickly bounced but my joy was short lived and I’m back in the red. April’s hike to employer’s National Insurance contributions will drive up JD’s staff costs, as will the 6.7% hike to the minimum wage. There are also concerns over Trump’s threatened tariffs.
My 2025 total return could top 20%!
Yet I expect JD Sports to shake off these worries and rally hard when consumer confidence finally recovers. Today it looks great value trading with a P/E of just 8.45 times. I reckon oversold stocks like this could lead the next bull run. So when will that be?
Morgan Stanley, Goldman Sachs and JP Morgan all reckon the S&P 500 will end 2025 at 6,500. If they’re right, that’s an increase of 7.7% from today’s 6,034, with dividends on top.
It’s not spectacular yet after the recent stellar run, I’d take that. But what about the FTSE 100?
The Economic Forecast Agency reckons it could end 2025 trading at 9,500. That’s up 14.7% from today’s 8,281. Now I would definitely take that. Dividends and share buybacks could lift the total return past 20%.
Forecasts are just educated guesses, of course, and I think this one looks a bit high. However, given the low FTSE 100 valuation and low sentiment, I think the cycle could swing back in the UK’s favour. And that’s why I’m loading up on shares like JD Sports while I can.
