Will the FTSE 100 slump to 6,000 or rise to 8,000 in 2019?

Investors are split on whether they expect the FTSE 100 to post gains in 2018, according to a poll conducted by interactive investor, the parent company of Money Observer.

Investors are split on whether they expect the FTSE 100 to post gains in 2019, according to a poll conducted by interactive investor, the parent company of Money Observer.

Of those surveyed, the largest group expected the FTSE 100 to see either slightly negative or flat price growth in 2019.

In total, 34% said they expected the blue-chip index to close 2019 somewhere between 6,500 and 7,000. The FTSE 100 started the year just shy of 6,750, having ended 2018 deep in the red, posting a decline of 12.5%.

Added to that, a smaller but more bearish contingent of investors are expecting even more damage to the FTSE 100 in 2019. A total of 8% of investors said they expected the the FTSE 100 to end 2019 between 6,000-6,500, while 7% expect it to sink below 6,000.

On the other side of the bull and bear divide, some 30% of investors predicted a close of somewhere between 7000 and 7,500 in 2019, representing moderate price growth for the index. More bullishly, 13% expected the index to climb to 7,500-8,000, while 8% expect the FTSE 100 to break the 8,000 mark.

Russ Mould, investment director at AJ Bell, is also optimistic. While noting the UK faces real risks in the form of Brexit, a sluggish economy and the potential for a Labour government, he argues the index has the possibility to go higher in 2019.

Mould argues that both main scenarios for Brexit could help push up prices on the index. He notes: “In the event of a ‘hard’ Brexit or ‘no deal’ scenario is it easy to envisage further substantial drops in sterling.

“That could help to fire the FTSE 100 higher, as it did in June 2016, given how two-thirds of the index’s earnings hail from overseas, even if the ‘sterling down, FTSE up’ trade has admittedly been less successful of late”

On the other hand a softer Brexit could see the FTSE enjoy a “relief rally”, he adds.

Other market commentators agree that a softer Brexit would be welcomed by markets. As Callum Abbot, co-manager of JPMorgan Claverhouse investment trust, notes: “The UK equity market is particularly unloved due to Brexit, a palatable resolution could be a ‘double dividend’ through a re-rating and a re-allocation to UK equities.”

However, whichever way the market goes, argues Mould, the index still offers investors opportunities. He argues: “Investors may still be able to prosper through careful stock selection, as the index is packed with companies which either look cheap on an earnings basis, offer a fat dividend yield, or both, after another year of poor overall performance.”