FTSE 100 to 7,000 by next Christmas

For most of this year I have had to put up with my colleague Andrew saying “6,000 by Christmas” each time there is mention of the FTSE 100 index of leading UK company shares.

With Andrew currently on holiday in New Zealand, it looks like he might have been right.

As I type this, the FTSE 100 is only 30 points away from 6,000 points, requiring growth of just 0.5% over the next couple of days of trading to reach that level.

The index has reached a nine month high thanks to continued optimism across the pond that US politicians can reach an agreement to avoid a ‘fiscal cliff’ as they negotiate a new budget deal.

Assuming investor sentiment remains positive, it looks likely the FTSE 100 can top 6,000 in time for Christmas Day.

But what about next year?

One fund manager briefing note we received today suggests that 7,000 points could be a reasonable goal by Christmas 2013.

Charteris Treasury Portfolio Managers have been predicting an upside break in the FTSE 100 index from its current trading pattern.

They think this break has just been experienced, which means the next step (in their opinion) should be a sharp upward move of approximately 20% which will take the FTSE 100 index to around 7000.

This ‘chartist’ approach towards predicting market movements looks for well known patterns in financial markets, using them to forecast future trends.

As with all investment predictions, there is no way of knowing whether this will materialise until after the event.

There is good reason for optimism in developed equity markets for 2013, despite the UK and other major economies remaining subdued.

Markets have a habit of leading economies when it comes to recovery. With many established companies sitting on healthy cash reserves, we expect to see valuations driven higher next year as a result of greater merger and acquisition activity.

Smart investors will take all investment forecasts with a healthy pinch of salt and make small tactical adjustments to the underlying asset allocation of their portfolios, rather than making substantial bets on a single asset class.

What all of this does mean however is that I probably have to put up with Andrew saying “7,000 by Christmas” when he gets back from his holiday.

Photo credit: Flickr/gem66