The UK stockmarket will finally break through the 7,000-point barrier in 2015, several fund managers have said in an end-of-year straw poll.
Since the bursting of the dot-com bubble in 2000, the FTSE 100 index of the UK’s largest companies has never gone above its all-time closing high on 31 December 1999 of 6,930.2 points, although investors have been compensated with dividend income in the meantime.
The FTSE 100 may be forecast to break new ground next year, but, according to some, it is a “crummy index” and better returns can be found elsewhere.
Nevertheless, Chris Rodgers, founder and senior UK equity manager at Four Capital, is optimistic. He thinks that “against all the current gloom” there is still no doubt the global economy will look better next year.
Mr Rodgers said the FTSE would “absolutely” break the 7,000-point barrier and perhaps go higher.
“There isn’t quite the same panicky pressure about the US interest rates, [and] Europe is not collapsing, and periphery economies are growing,” the manager said.
“So starting from the assumption that growth isn’t so bad, I draw the conclusion that it will be accelerating from next year.”
The UK’s index of 100 leading shares had a strong 2013, rising 18.6 per cent, but this year it has endured severe drawdowns, with the largest being a more than 9 per cent loss from September 19 to October 16.
The bourse has been particularly battered this month with oil stocks weighing heavily on the market.
Neil Veitch, fund manager at SVM Asset Management, also thought the FTSE would end the year close to 7,000 points, partly based on his view on the trajectory of the oil price next year.
He predicted the commodity’s price would rebound by the second half of 2015 and could be back to $80 per barrel by the end of the year.
Mr Rodgers added the fall in the oil price would be a “definite positive” for the market as consumers would feel better off.
But Investec Asset Management’s Max King claimed the FTSE 100 was a “totally crummy index”, because only one or two of its largest constituents need to perform well to make the index rise. He added that he thought the index would “do okay and we may have some pleasant surprises”.
His prediction was also 7,000 points but thought the FTSE 250 index would produce better returns next year.
Top-performing Royal London UK Equity Income manager Martin Cholwill said while “it doesn’t feel like a bull market” he thought positive noises surrounding dividends could mean companies known for their payouts to shareholders could bolster the index.
This view led Mr Cholwill to also suggest 7,000 points would be a sensible level for the FTSE to end next year.
But other market participants were less bullish, even though some macroeconomic factors could provide a tailwind.
Average earnings growth outstripped inflation for the first time since 2009 this year, with average weekly pay excluding bonuses rising by 1.3 per cent from July to September, compared to the same period last year, according to the Office for National Statistics. This was against a 1.2 per cent reading for consumer price inflation.
Rob Gleeson, head of FE Research, said the market would “really have to be on a run to break 7,000” and so he expected a slightly more conservative 6,850 points to be the end point for 2015.
But even this prediction was too high for Julian Chillingworth, chief investment officer at Rathbone Unit Trust Management, whose forecast in 2013 for where the FTSE would end that year was the most accurate given to Investment Adviser.
Mr Chillingworth thought the index in 2015 would face enough headwinds to make it fall to 6,250 points, even lower than its level at the time of going to press.
Managers make their calls – where will the FTSE 100 end next year?
Chris Rodgers, Four Capital - 7,000
Neil Veitch, SVM Asset Management - 7,000
Max King, Investec Asset Management - 7,000
Martin Cholwill, Royal London Asset Management - 7,000
Rob Gleeson, FE Research - 6,850
Julian Chillingworth, Rathbone Unit Trust Management - 6,250
