Get ready for a FTSE 100 surge!

Get ready for a FTSE 100 surge !

Zaven Boyrazian

The latest projections from the Economy Forecast Agency put the UK’s flagship index as high as 9,637 points by this time next year. Compared to current levels, that’s a potential 18.6% gain before even counting the impact of dividends.

It might not happen, of course, and forecasts need to be taken with a pinch of salt. But what’s behind this bullish prediction? And which FTSE 100 stocks do I think investors should be paying attention to?

Catalysts for growth

Despite what the stock market’s performance indicates, 2024’s been quite an uncertain year for many UK businesses.

But today, most of the political uncertainty has evaporated. And while not everyone is pleased with the latest Budget, the clarity enables companies to make more informed decisions. As for interest rates, they currently stand at 4.75% versus their peak of 5.25% at July.

Another rate cut’s expected in December. But providing inflation remains cool, rates could fall significantly throughout 2025 to an estimated 3.75%. In other words, the cost of debt for households and corporations may be on track to tumble by 30% from its peak. And apart from alleviating it also helps spark economic growth across the board.

With that in mind, it’s no surprise analysts are bullish for 2025.

https://www.etsy.com/uk/shop/FrenchyMakes

What to watch

Even if the best-case scenario occurs, there’s always the possibility that growth is already baked into valuations. As such, the FTSE 100 may still fall short of expectations.

Howden Joinery Group Plc

Over the last 12 months, the fitted kitchen and bedroom specialist has actually performed fairly admirably, rising 25%. Yet, since mid-September, the stock price is down by double-digits. Investor concerns have been rising as the entire home renovation sector’s getting hit hard.

Demand is currently quite weak as families postpone projects into 2025 in anticipation of lower interest rates. And the impact of this is quite clear on Howden’s financials, with year-to-date UK growth sitting at just 1.7%, against its double-digit historical average. And while earnings remain on track, management’s warned they’re likely to fall towards the lower end of guidance.

While frustrating, the firm has more than enough cash to see it through the storm. And with its shares trading lower, an opportunity might have emerged for patient investors to research. After all, when interest rates drop, home renovation should rise.

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

The post Get ready for a FTSE 100 surge ! appeared first on The Motley Fool UK.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

Zaven Boyrazian has positions in Howden Joinery Group Plc. The Motley Fool UK has recommended Howden Joinery Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.