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FTSE 100 index forecast: UK stocks face an uphill battle in 2024

By: Invezz

The FTSE 100 index was left in the dust by its global peers in 2023 as the UK continued facing substantial headwinds. The index, which tracks the biggest blue-chip companies in the UK, was barely moved in 2023 while its US and European peers surged to a record high. It was trading at £7,700 on Friday, about 7.1% from its lowest point in 2023.

Underperformance continues

There were several key reasons why the FTSE 100 index struggled in 2023. First, its composition had a major role in this trend. Unlike its American peers, the index is mostly composed of traditional sectors. Financials are the biggest components followed by consumer staples, industrials, energy, and health care.

This was a big issue since it has no major technology companies. And the technology sector helped most indices surge. In the US, the S&P 500 index rally was led by the so-called Magnificent 7, which includes companies like Nvidia, Microsoft, and Apple. 

Second, the financial segment came under pressure following the mini-banking crisis earlier this year. This crisis led to the collapse of key banks like Credit Suisse, First Republic, and Silicon Valley Bank. In the aftermath, FTSE 100 banks like Lloyds, Barclays, and NatWest made no major moves during the year.

Third, UK investors pulled money from the FTSE 100 index companies. The most recent data revealed that retail investors sold stocks worth over £11.9 billion in 2023 as the cost of living crisis escalated. They had exited positions worth over £12 billion in the previous year. 

Many retail investors are concerned about the prolonged underperformance of their UK equities and then moving to other assets. Some of these investors moved their funds to short-term gilts, which provided higher yields as the Bank of England hiked rates. 

The worst-performing companies in the FTSE 100 index were Anglo American, St James Place, Burberry, British American Tobacco (BAT), and Prudential. On the other hand, the top gainers in the index were Rolls-Royce, Carnival, Melrose, and Sage.

FTSE 100 index forecastFTSE 100 index

FTSE 100 chart by TradingView

Turning to the daily chart, the FTSE 100 index is sitting at an important resistance level at £7,747, where it struggled to move above since July. The index has formed what looks like an inverse head and shoulders pattern. It remains above the 50-day and 100-day Exponential Moving Averages (EMA). And the two averages have formed a bullish crossover.

Therefore, I suspect that the index will have a bullish breakout in the coming months. If this happens, the next price to watch will be at £8,046, its highest swing in February. This price is just 3.91% above the current level, meaning that it will likely lag other indices like the S&P 500 and Nasdaq 100.

The post FTSE 100 index forecast: UK stocks face an uphill battle in 2024 appeared first on Invezz

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