Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But that must change, mustn’t it?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 broke through 8,000 points in early April. Could we see the start of a long-awaited bull run?

Well, no. At least, it seems, not yet.

The Footsie took a brief look above 8,000, didn’t like what it saw, and quickly ducked down again. It’s down to 7,850 points at the time of writing.

Should you invest £1,000 in Nvidia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?

See the 6 stocks

So what’s wrong? After all, forecasts for our top UK shares look strong. They have dipped a bit as estimates have been scaled back. And we’re still waiting for 2023 results to all come in.

10% earnings growth

But analysts predict total earnings growth from FTSE 100 stocks in 2023 of close to 10%.

At the start of the year, the FTSE 100 was on an overall price-to-earnings (P/E) ratio of about 11. The index has gained a little since then, but after this latest retreat, really not very much at all.

The average P/E over the past decade has been around 16, and that’s close to the Footsie’s long-term average.

Assuming it will get back around that mark, and factoring in that potential 10% earnings growth, I reckon the FTSE 100 could easily be 30% undervalued right now.

Dividends

And then let’s add in the forecast dividend yield. According to AJ Bell‘s Dividend Dashboard, the City puts it at 3.9% for the year just ended. And we see 4.2% for 2024, which is historically strong.

Investors can get more than that from a Cash ISA right now, and that’s guaranteed. But once interest rates fall, that can’t last.

By the end of the year, if we get the interest rate cuts we hope for, Cash ISAs, gilts and bonds could all look a lot less attractive. Might that be the spur for a major move back into stocks and shares?

Cheap stock?

As an example of how crazily cheap I think some FTSE 100 shares are right now, let’s look at Lloyds Banking Group (LSE: LLOY). For no other reason, really, than that I own some.

The forward Lloyds dividend stands at 5.4%. And the forecast P/E for 2024 is just nine. What’s more, growth forecasts for the next few years would drop the P/E as low as six, and push the dividend yield close to 7%.

Are UK investor mad to not want to snap up a bargain like that?

Well, the short-term risk is still there, with interest rates hurting Lloyds’ mortgage business. And when they fall, we should see lower lending margins… it hurts whichever way we look at it. I think Lloyds shares could well face further weakness.

Sentiment

But by far the biggest factor, for me at least, is UK investor sentiment. While the fear is still here, UK share prices might well stay low.

Still, I really do think we could see a boost in stock market confidence in the second half of this year.

And if the FTSE 100 doesn’t end the year well above 8,000 points… well, we’ll just be able to buy shares cheap for a bit longer.

Should you buy Nvidia now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Aj Bell Plc and Lloyds Banking 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.

More on Investing Articles

Investing Articles

Here’s what Stocks and Shares ISA investors are buying in 2025 to build a second income

Which shares are investors buying right now in the hope of eventually retiring on a healthy second income? Quite a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Oh dear! Warren Buffett says people should only invest in companies they understand

Warren Buffett, the American billionaire, says research is the key to being a successful investor. But our writer thinks it’s…

Read more »

Investing Articles

How much would an investor need in an ISA to earn a £700 monthly passive income?

Ben McPoland digs into some numbers to show how a Stocks and Shares ISA portfolio could eventually throw off a…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Now that’s a surprise! The Lloyds share price went up despite disappointing results

The Lloyds Banking Group share price reacted positively to its 2024 results. Initially, our writer struggled to understand why.

Read more »

Investing Articles

Could this FTSE 250 trust outperform Rolls-Royce over the next 5 years? I think so — and then some!

Our writer believes this US-focused FTSE 250 investment trust could have the potential to beat Rolls-Royce's price performance by 2030…

Read more »

A graph made of neon tubes in a room
Investing Articles

Here’s why the Standard Chartered share price jumped 5% on FY results

Investors have pushed the Standard Chartered share price higher in the past 12 months. Judging by these results, it seems…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

3 little-known UK shares for investors to consider buying

UK shares outside the FTSE 100 and the FTSE 250 don’t get much attention. But there are some quality businesses…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Glencore’s share price is 40% off its highs. Time to consider buying?

Back in 2021, Glencore’s share price was near 575p. Today however, it’s near 330p – around 40% lower. Is this…

Read more »