Analysts at the Bank of America Merrill Lynch have tipped the FTSE 100 to rise to 7,400 next year, citing the strengthening economy and an accommodating central bank as reasons why stocks can reach such highs.
In a note to clients, the group said UK stocks could rise 30% by 2015 as a result of positive factors, with the FTSE 100 hitting 7,400 next year.
"We estimate UK equity market cap could rise by 30% by 2015," the note said.
"We maintain our FTSE target of 7,100 for mid-2014, and introduce a target of 7,400 for FY14."
The number chimes with a prediction from Old Mutual's Richard Buxton who said the FTSE 100 would trade between 6,500-7,300 points as we head into 2014.
BoAML said in the note that while the UK economy is gathering pace, monetary policy will likely remain loose, supporting equities.
"Base rates are now linked to unemployment being greater than 7% and the BoE does not expect to raise rates until 2016," the note said.
"With global bond yields beginning to rise, this implies a steep gilt yield curve and loose monetary conditions through 2014/15; in turn giving a supportive backdrop for risky assets."
While the FTSE 100 has enjoyed some solid gains this year - it is up 11% YTD - it remains some way off recent highs above 6,800 points, currently trading at 6,579.
However, the BoAML analysts tipped sectors such as banks, real estate, energy and retail to power the index above 7,400 by the end of next year.
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