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In January final yr, I made two inventory market predictions, together with one in regards to the FTSE 100. Wanting again, I believe it’s honest to say the accuracy of those has been blended.
The primary was that Tesla inventory would drop by not less than 40%. I do know, I do know. Tesla defies logic and will be saved elevated by visionary CEO Elon Musk and his daring robotaxi and humanoid bets.
I simply thought actuality would possibly set on this yr, as a result of “weak shopper spending, the potential elimination of EV subsidies, and rising competitors from cheaper hybrid automobiles“.
Given these challenges, I assumed a ahead price-to-earnings (P/E) ratio of 117 regarded unsustainable. However the inventory is up 19% yr to this point, with the ahead P/E a number of now sitting at 213.
To be honest, I did say that I used to be “inviting a load of egg on my face” making worth predictions about an unpredictable inventory like Tesla.
My second prediction was that the FTSE 100 would rise for the fifth straight yr in 2025. This may have been the primary time the index had carried out so because the Monetary Disaster.
Barring some earth-shattering market crash between now and subsequent week, the Footsie will finish the yr effectively up. It has jumped 21%, with dividends pushing the precise return even greater. I didn’t envisage such distinctive returns.
2026
To keep away from one other 1-1 stalemate, listed below are my three FTSE 100 predictions for 2026:
- The FTSE 100 makes it a sixth yr of optimistic good points. Not because the Eighties has it carried out that. Decrease rates of interest, a comparatively steady UK political backdrop (not less than in comparison with earlier years), and extra certainty round world tariffs make me assume that is seemingly.
- With some kind of Ukraine-Russia peace settlement showing extra seemingly, defence shares like Babcock Worldwide may have a mushy yr.
- Diageo (LSE:DGE) will lastly put up a optimistic return, its first since 2021.
Diageo
What makes me assume this about it? Effectively, the inventory has crashed 41% in simply two years, leaving it on a rock-bottom ahead P/E ratio of 13. This tells us that sentiment is at the moment extremely weak for the inventory.
However excellent news may come within the form of rate of interest cuts within the New Yr, each within the UK and in Diageo’s key US market. Over time, it ought to put more cash in folks’s pockets, doubtlessly serving to premium spirits volumes decide up.
Crucially, it has Sir Dave Lewis beginning as CEO in January. As a shopper items veteran who turned Tesco round, I anticipate him to supply a transparent and credible turnaround technique in some unspecified time in the future in 2026.
In spite of everything, Diageo nonetheless has a number of world-class manufacturers which are rising globally, notably Guinness and Don Julio. That is removed from a damaged firm.
Now, I ought to say that I don’t anticipate the inventory to skyrocket or do something mad. Any turnaround will seemingly be gradual and take time. There may even be extra weak gross sales reported in 2026.
However the bar for optimistic surprises could be very low, and I believe subsequent yr would possibly deliver one or two. So traders trying to find a FTSE 100 turnaround candidate would possibly need to take into account Diageo whereas it’s nonetheless down within the dumps.
