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2024 has been a strong yr for the inventory market. Within the US, the S&P 500 has commonly damaged all-time highs. It’s up 27.25% thus far this yr, with dividends on prime.
The FTSE 100 is up 7.08% thus far. The trailing yield of three.58% lifts the full return above 10%. In contrast, the S&P 500 yields simply 1.18%.
The UK market began 2024 brightly, however slowed within the second half of the yr. Whereas July’s election introduced political stability, October’s Funds forged a shadow over our progress prospects.
Can the FTSE 100 do higher subsequent yr?
It’s a special story within the US, the place markets went gangbusters after the election, due to the so-called Trump bump.
Whereas President-elect Donald Trump’s pledge to slash company taxes and crimson tape ought to enhance markets, a lot of the joy is now priced in. The S&P 500 appears costly buying and selling with a price-to-earnings (P/E) ratio of 30.9. The FTSE 100 is roughly half that, at round 15.5 occasions earnings.
I want to purchase particular person FTSE 100 shares relatively than observe the index and whereas I’ve performed properly I’ve had the odd failure too.
I had excessive hopes for coach and athleisurewear specialist JD Sports activities Trend (LSE: JD) once I purchased it on 22 January. Its shares had simply plunged after the board issued a revenue warning following a poor Christmas buying and selling interval.
The JD Sports activities share worth shortly bounced however my pleasure was brief lived and I’m again within the crimson. April’s hike to employer’s Nationwide Insurance coverage contributions will drive up JD’s workers prices, as will the 6.7% hike to the minimal wage. There are additionally considerations over Trump’s threatened tariffs.
My 2025 complete return may prime 20%!
But I count on JD Sports activities to shake off these worries and rally onerous when shopper confidence lastly recovers. As we speak it appears nice worth buying and selling with a P/E of simply 8.45 occasions. I reckon oversold shares like this might lead the following bull run. So when will that be?
Morgan Stanley, Goldman Sachs and JP Morgan all reckon the S&P 500 will finish 2025 at 6,500. In the event that they’re proper, that’s a rise of seven.7% from right this moment’s 6,034, with dividends on prime.
It’s not spectacular but after the latest stellar run, I’d take that. However what concerning the FTSE 100?
The Financial Forecast Company reckons it may finish 2025 buying and selling at 9,500. That’s up 14.7% from right this moment’s 8,281. Now I might positively take that. Dividends and share buybacks may elevate the full return previous 20%.
Forecasts are simply educated guesses, in fact, and I believe this one appears a bit excessive. Nonetheless, given the low FTSE 100 valuation and low sentiment, I believe the cycle may swing again within the UK’s favour. And that’s why I’m loading up on shares like JD Sports activities whereas I can.
