Where Next for the FTSE?

What should investors in the UK stock market expect this year? Will the index rise further - and will stocks increase their dividend payments?

Fidelity International 7 January, 2014 | 12:21PM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Fidelity's Michael Clark, of the Fidelity MoneyBuilder Fund, and Sam Morse, of the Fidelity European Fund discuss the outlook for the UK stock market.

The UK market has had another good year and I think we can say that the stock market has fully recovered from the swoon of 2008 and 2009. Despite this, the valuation of the market at 14 times earnings is still reasonable in my opinion. The dividend yield of 3.5% remains attractive versus the yields offered by fixed income and is well above the rate of inflation.

On the face of it, therefore, we can look forward to another year of positive real returns in 2014. There are encouraging signs of economic stabilisation and renewed growth. The housing market continues to recover and industry is doing well in many sectors. But economic growth has not yet returned to normal fully and consumer incomes continue to fall in real terms. Any disappointment on future GDP growth could provoke some turbulence in markets. But as a result of that I think we are unlikely to see a destabilising move upwards in interest rates.

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Fidelity International

Fidelity International  

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