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Investors expect FTSE 100 to climb above 7,000 by end of next year

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16/12/2020
Three quarters of DIY investors expect the FTSE 100 to break through the 7,000 barrier by the end of 2021.

A survey by investment platform AJ Bell revealed nearly half of the 2,000 DIY investors expected the FTSE 100 to hit 7,000, while a fifth said they thought it would reach 7,500 by the end of next year.

For 3%, they believed the blue-chip index would climb to 8,000 – exceeding the previous record high of 7,877 reached in May 2018.

When asked about which stock market they expect to perform best, the majority, 36% gave Asia as their answer while 17% said the UK. Just 4% said Europe.

Half of investors expect technology stocks to continue their strong run of outperformance as two thirds of investors think vaccines will mean an end to lockdowns from March 2021.

Laith Khalaf, financial analyst at AJ Bell, said investors are pretty bullish about prospects for the FTSE next year, with most of them pencilling in a rise of at least 7% from current levels.

“However, less than one in five investors think the UK will be the best performing market next year which shows confidence in global stocks more broadly. Investors are fairly split on which region will be the best performer in 2021, but Asia gets the most votes. That’s perhaps because China was first into the pandemic and managed to contain the virus relatively well.

“Just over half of investors expect technology stocks to continue on their winning run next year with only one in five expecting a reversal of fortunes for the sector. A significant proportion of investors were undecided too. It’s becoming harder and harder to cast doubt on the seemingly limitless rise of the tech stocks, though the fact the Tesla share price has risen eightfold in the course of twelve months sets alarm bells ringing. Amazon’s valuation of 90 times earnings now looks positively pedestrian compared to Tesla’s PE ratio of over 600 times earnings. But the plentiful short sellers who have bet against Tesla’s meteoric rise have been continually burnt, badly,” he said.

Khalaf added: “Around two thirds of investors think that vaccines will prevent the need for lockdowns from March 2021 onwards. It’s clear then that vaccine hopes underpin a lot of investors’ confidence, and the outlook would be nowhere near as positive if we were still waiting for the outcome of trial results. However that still leaves around a third of investors who aren’t convinced vaccines will ride to the rescue by Easter. Perhaps after a testing year, they are hoping for the best, but expecting the worst.”

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