What will the FTSE do in 2014?

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It is that time of year when investment experts try to do the impossible – foretell the future.

Predictions about how shares in global stock markets will perform in 2014 are of course guesswork. But asking a handful of respected experts, who have made astute calls over the years, what they think next year will hold gives savers a greater chance of bagging themselves a winner or two.

Here is what the experts are saying about the stock market’s prospects in 2014.

FTSE 100 to hit record high in 2014?

Since the financial crisis British shares have delivered stellar returns. If you were brave enough to put your savings into a FTSE 100 “tracker” fund, which aims simply to replicate the performance of the London stock market as opposed to beating it, you would have netted a 50pc return on your investment.

During 2013 UK shares on the surface had a good year, with the FTSE 100 index returning 9pc to trade at about 6500 today. Since the Victorian era shares have on average delivered 6pc to 7pc a year, so an inflation-beating 10pc return on your money in 2013 looks fairly reasonable.

UK funds managed by City stock pickers, who attempt to beat the performance of the index, have also had a good year. The average fund has returned 23pc, beating the FTSE All Share return of 17pc. This index includes the smaller and faster growing UK companies along with the big stocks found in the FTSE 100, so is seen by many as a better reflection of UK market’s performance.

Given such solid performance it is right to ask whether there is still potential to make more money from UK shares. Investors buying into the market today may be concerned that they have missed out on gains and could be buying at the top.

UK share performance in 2013.

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A – Investment Management Association’s “All Companies” fund sector (23.3pc rise)
B – FTSE All Share, including income and capital growth (16.7pc rise)
C – FTSE All Share tracker funds, including income and capital growth (15.8pc rise)

But the vast majority of experts remain positive and argue that there is plenty of money still to be made. They argue that although UK shares have performed well in 2013, they have been held back by the strong performance of the pound, which since July has strengthened by 10pc against the dollar.

This has stunted export growth for British businesses and in turn dented their performance on the stock market, with the FTSE 100 posting a loss of 4pc since the summer.

Some experts are even predicting that the FTSE 100 will hit a new all-time high in 2014, surpassing the 6930 it achieved during the tech boom in December 1999. One investor in this camp is Guy Foster, who buys shares for wealth manager Brewin Dolphin. Mr Foster is backing the FTSE 100 to break through 7400 by the end of 2014, which would represent a 15pc return on an investment in a tracker fund made today.

Other firms that are bullish include economic forecasters Capital Economics, which predicted that the FTSE 100 would hit 7500 next year An even bolder call has been made by analysts at Citigroup, who have said they expect the index to reach 8000.

Article by the Telegraph – To see the full version follow click here

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