At this time of year, I like to make some FTSE 100 predictions for the year ahead. I don’t make specific year-end forecasts. Instead, I provide some more general thoughts designed to help investors position their portfolios.
So what are my predictions for 2025?
How did I fare this year?
Before I do so, it’s worth looking at how my predictions for this year fared.
This time last year, I said that:
- The FTSE 100 would perform better in 2024 than it did in 2023 when it returned 7.9% (including dividends)
- The index would rise above 8,000 at some point during the year (it was at 7,575 at the time)
- There would be some takeover activity within the index during the year
Now, the year’s not quite over and anything could happen in the next few weeks. But at this stage, it’s looking like I’ll get three out of three.
As I write, the FTSE 100’s up about 7.3% for the year. Add in dividends, and we could be looking at a total return of around 11%. Meanwhile in Q2, the Footsie rose above 8,000. And since then, it has remained above this level most of the time.
As for takeover activity, there’s been plenty. Companies that have been targets include DS Smith, Rightmove, Darktrace, and Anglo American (only the Darktrace deal’s been completed).
More takeover activity
As for my predictions for 2025, the first is that takeover activity’s going to continue. Right now, many Footsie companies look cheap. So I reckon more opportunistic bids will come in.
Stocks I believe could be takeover targets include healthcare company Smith & Nephew, hotel operator Whitbread, and gambling group Entain. All three are well off their highs at present.
No 10,000 milestone
My second prediction is that the FTSE 100 won’t hit 10,000 in 2025. I do think there’s a chance the index could hit 9,000. But 10,000’s too much of a stretch for me.
Hitting that level would need a rise of about 20% from here. I think that’s unlikely given the index’s average returns (but not impossible).
Big gains from individual stocks
Finally, I’m going to say there will be plenty of stocks within the index that return 30% or more for the year.
One stock I believe has the potential to do this and is worth considering is JD Sports Fashion (LSE: JD.). It looks super-cheap right now on a forward-looking price-to-earnings (P/E) ratio of 6.9. To rise 30%, we’d only need the P/E ratio to rise to nine (which would still be cheap). I think that’s achievable.
That said, for the valuation to rise in 2025, the company will have to show it has some momentum. Recently, business performance has been very underwhelming due to a lack of consumer spending and unusual weather patterns.
I think there’s potential for a pick up in momentum, especially now that the company has substantial exposure to the US (where consumers have more disposable income). But there are no guarantees this will happen – if consumer spending dries up, all bets are off.
