The FTSE 100 is projected to achieve a 5% increase this year.

As the year’s final trading day arrives, investors are tallying their profits and losses while shifting their focus toward 2025.

The year 2024 has continued the upward trend in stock markets, achieving record highs across both the European and American landscapes. Wall Street has been at the forefront, buoyed by a sustained boom in technology stocks over the past twelve months.

UK investors have also reaped rewards in the stock market. The blue-chip FTSE 100 index is on track to increase by 5% this year, aligning closely with the European average. This performance marks its strongest year since 2021, when it surged by 14.3%, following gains of 0.9% in 2022 and 3.8% in 2023.

However, the FTSE 100, often referred to as the ‘Footsie,’ is closing the year with a slight downturn, having fallen by 2% in December. It ended yesterday’s trading session at 8,121 points, significantly below its May peak of 8,474 points, which was driven by declining inflation and expectations of interest rate cuts that boosted stock prices.

In contrast, the smaller FTSE 250 index, considered a more accurate reflection of the UK economy, has risen by approximately 3.6%. This figure does not account for dividend income, which shareholders have enjoyed throughout the year.

Russ Mould, Investment Director at AJ Bell, commented: “Total returns from the UK stock market in 2024 have significantly outperformed cash, bonds, and inflation. However, the FTSE 100 continues to lag behind the US markets, highlighting ongoing challenges in comparisons.”

Looking ahead, there is ongoing debate about whether the NASDAQ and S&P 500 will sustain their momentum into 2025. Nevertheless, investors seeking value and income might consider the UK market more closely, given positive forecasts for earnings and dividend growth.

Across the English Channel, France’s CAC 40 has declined by around 3% amid a year marked by political turmoil in Paris. Conversely, Germany’s DAX, which concluded the year yesterday, has surged nearly 19%, largely driven by a 60% increase in the stock of software giant SAP.

Technology stocks have also propelled Wall Street higher, with the Nasdaq up by almost 30% and the S&P 500 gaining over 23% so far this year. Tom Stevenson, Investment Director for Personal Investing at Fidelity International, explained: “Following the volatility of 2023, there has been a noticeable shift toward growth investments, supported by stabilizing inflation and a more optimistic outlook for interest rates.”

Despite these gains, equity markets have faced challenges in December, primarily due to disruptions in the bond market where rising yields have sparked concerns about persistent inflation into 2025.

The anticipated Santa Rally has been minimal this year, and today’s trading does not appear to promise one either, as futures markets suggest that London shares may experience a slight decline.