FTSE 100 to end 2022 on 7,750 points despite blue-chip index having among the worst capital returns this year, AJ Bell forecasts

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  • The FTSE 100 Index reached a record closing price of 7,877.45 at the end of May 2018
  • Analysis finds FTSE 100 and 250 have lower capital returns in 2020
  • Shell, and Fuller, Smith & Turner are among the FTSE 100 recommended buys

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The FTSE 100 should end next year within 130 points of its record valuation, a major investment firm’s analysis has predicted.

Greater Manchester-based AJ Bell forecasts the blue-chip index will end 2022 at 7,750 points, down from just under 7,200 today, but its record closing price of 7,877.45 at the end of May 2018.

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It also forecasts that the total income of companies on ‘FootC’ will double to their 2016 levels, while dividends will be at least 20 percent higher.

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Swim Back: AJ Bell estimates the FTSE 100 will end 2022 at 7,750 points, just below 7,200 today, but well behind the record closing price of 7,877.45 at the end of May 2018.

But a separate AJ Bell analysis of data from Refinitiv found that both the FTSE 100 and FTSE 250 were in the lower half of international stock market indices when measured by capital returns this year with 9.8 percent and 10.6 percent, respectively.

This is against returns of over 20 per cent for the S&P 500, Russia Trading System, France’s CAC 40 and the top-performing S&P Bombay Stock Exchange (BSE) 100 in India.

London markets tumbled in February and March 2020 as the coronavirus spread across the world, before ending 2008 as the worst year since the global financial crisis.

Poor performance: The AJ Bell analysis found that both the FTSE 100 and FTSE 250 were in the lower half of international stock market indices when measured by capital returns this year.

Poor performance: The AJ Bell analysis found that both the FTSE 100 and FTSE 250 were in the lower half of international stock market indices when measured by capital returns this year.

Investors have attributed its weak performance to the fact that it includes many companies in industries badly hit by the pandemic and the problems caused by the post-Brexit trading regime.

This also includes some technology companies, which have benefited heavily over the past two years by forcing millions of people to work from home, shop online or hold meetings on videoconferencing platforms.

Russ Mold, investment director at AJ Bell, said the giveaway of the FTSE 100 “could qualify due to a mix of unpredictable (oil and miners), indigestible (banks and insurers) and, at least for now. As regards ESG screens (tobacco, oil, miners, speculators and defense stocks).

Recommendation: One of four stocks AJ Bell suggested investors put their money behind Royal Dutch Shell, which was deeply affected by the collapse in oil prices last year.

Recommendation: One of four stocks AJ Bell suggested investors put their money behind Royal Dutch Shell, which was deeply affected by the collapse in oil prices last year.

‘So skeptics can stress that it will be difficult to find an incremental buyer for some stocks as many investors run ESG screens against multiple FTSE 100 stocks and just turn away.’

He also noted that low forecast earnings and dividend growth for the next year ‘may not set the pulse’ race, yet due to the composition of the firms on the index, it is the next year’s best-performing commodity prices and interest rates. Could be one of the rates. growth, and the yield curve becomes steeper.

AJ Bell, one of four stocks that suggested investors put their money behind Royal Dutch Shell, was deeply affected by the collapse in oil prices last year.

But after rebounding in petroleum prices as economies reopen in 2021, the group has returned to gains and recently announced a massive share buyback program.

The other three stocks recommended by the business are pub conglomerate Fuller, Smith & Turner, medical parts manufacturer Smith & Nephew and uranium firm Yellow Cake.

Mold added the FTSE 100 should be able to offer ‘near-term earnings growth and do so from a starting point of low valuation multiples – so the offer here will be jammed at lower prices today.

‘This would be in contrast to markets like the United States, which are filled with tech, social media, internet and biotech stocks, which offer the potential for long-term earnings growth from a starting point of high valuation multiples – so the package here will jam tomorrow. High prices.’

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