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FTSE 100 outlook: where is the index headed in 2020?

Despite the blue-chip index suffering its worst day in seven weeks on Tuesday, the FTSE 100 has rallied by more than 100 points since the start of the new year and could hit 8,000 in 2020 if Brexit progresses smoothly.

The FTSE 100 is on course to suffer its worst day in seven weeks on Tuesday, with the index down more than 1%, with global equities sliding as the market got spooked by the spread of a new coronavirus in China.

News that a fourth person in China has died from the new virus has drawn comparisons to the deadly severe acute respiratory syndrome (SARS) outbreak that hit 17 years ago.

The FTSE 100 was led lower by luxury and travel stocks such as Burberry, IAG and InterContinental Hotels, with all three falling between 1% to 3% on Tuesday.

The FTSE 100 is trading at 7588 as of 12:10 GMT on Tuesday.

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Could the FTSE 100 hit 8000 in 2020?

If recent global market optimism is anything to go by, it would seem a foregone conclusion that we will soon see the FTSE 100 surge higher to break from its 700 point range that has been in play for the past 12 months, according to Joshua Mahony, senior market analyst at IG.

‘However, questions remain over the true benefit to global growth from the recent US-China deal,’ Mahony said.

‘Therefore, we are likely to see the pound play a key role, and with the Bank of England looking increasingly likely to ease once again there is plenty of reasoning to believe we will see a FTSE 100 boost from lower rates and a weaker pound,’ he added.

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An orderly Brexit key to FTSE 100 outlook in 2020

The direction that UK equities go in will depend heavily on if an orderly Brexit can be delivered, with the 31 January deadline fast approaching.

If Brexit does go smoothly and the global economy remains relatively stable, the FTSE 100 stands a chance of hitting 8,000 by the end of 2020, according to Russ Mould, investment director at AJ Bell.

'Granted, the issue of Brexit must still be resolved and doubts continue to hover over the health of the global economy,’ he said. ‘However, were the UK to strike a trade deal with the EU, Washington and Beijing to settle their differences once and for all and governments around the world abandon austerity and launch looser fiscal policies then the world could look very different.’

‘Even if the FTSE 100 fails to challenge the 8,000 mark, investors may still be able to prosper through careful stock selection, as the index is packed with companies which either look cheap on an earnings basis, offer a fat dividend yield, or both,’ Mould added.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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