LONDON (Reuters) - The FTSE 100 looks set to rise 6 percent from now until the end of 2013 as confidence in the global economy improves, according to a Reuters poll.
The FTSE index, which owing to its makeup is often driven more by international than domestic conditions, is expected to withstand a period of uncertainty over the course of global monetary policy and set a record high in the next 12 months.
This is partly due to expectations that the world economy will perform better next year, and is supported by evidence that the struggling British economy appears to have built a more solid base for future growth.
The FTSE 100 is expected to hit 6,700 points by year-end - up 6 percent from Monday’s close of 6,330.49, and about 14 percent on the year, according to the median forecast in the survey of over 50 traders, strategists and fund managers.
But that would be 3 percent short of the year’s high of 6,875.62 struck on May 22.
“Growth remains low, but significant monetary stimulus continues to support markets,” said James Humphreys at Duncan Lawrie Private Bank, referring to the global economic outlook.
Analysts revised down their end-year predictions following a volatile quarter, in which the stock market raced more than 300 points above the average mid-year target before correcting to around 200 points below it.
Uncertainty over the status of the U.S. Federal Reserve’s bond buying programme continues to muddy the waters for equity investors. The Fed meets this week and many say it is only a matter of time before it slims down its monthly purchases.
The FTSE has fallen 8 percent since May 23 after Fed officials openly pondered when to start winding down their unprecedented stimulus programme.
The majority of analysts saw stimulus being slowed late this year, which would give markets room to prepare for it, and the global economy time to recover a bit more.
“We may well see a tapering as early as the final quarter of this year - I would suggest that late September/early October will be accurate,” said Brenda Kelly, analyst at IG Index UK.
“At that stage, most of the expectations for tapering will be priced into the market and we will have a better idea how well the U.S. economy is doing.”
By this time next year, however, the FTSE was expected to reach a record 7,000 points, as confidence in economic growth returns, reducing the reliance on central bank stimulus.
“The performance will be driven by multiple expansion - as confidence in the economic outlook returns - more than (earnings) upgrades in the next six months,” said Martin Moeller, Head of Global Equities at UBP.
The median forecasts masked divergent views, with a roughly 2,000-point range of predictions for the index at mid-2014.
However, there was consensus that downside from current levels was likely to be limited, with none predicting the index would be down more than around 330 points from current levels in 12 months’ time. The top estimate was as high as 8,000.
Additional polling by Ashrith Doddi and Snehasish Das; Editing by Louise Heavens