Brexit dominated the FTSE 100 in 2019. International stock traders cut positions over uncertainty in the UK economy. Yet, capping the year was the Tories crushing Labour in the general election. This saw both the FTSE 100 and sterling soar in the days after the vote.
The hope is that a clearer direction on Brexit has removed some of the uncertainty the FTSE 100 faced in 2019. In the words of Lee Wild, head of equity strategy at Interactive Investor, this should 'breed confidence among businesses here and overseas to invest in the UK.'
Still, it's unlikely to be plain sailing as the UK disengages from the world's biggest trading bloc. Any initial flurry in stock investment could slow given the complex nature of Brexit.
Progress on macroeconomic issues like the US-China trade war early in 2020 will help. Especially if foreign investors can find some decent value within the FTSE 100.
Against this background, here's our pick of the FTSE 100 stocks to watch in 2020.
Boohoo share price
The company is increasingly being considered more of a tech stock than a retailer, and analysts seem to think there's more growth left. Boohoo carries an average price target of 330p. Hitting this would see a 10.3% gain on the current share price.
Ocado share price
Ocado's [OCDO] share price gained 58.6% in 2019, despite some setbacks including a warehouse fire at its Andover facility. According to Russ Mould, investment director at AJ Bell ‘Ocado’s plan to transform itself into a software play, via global licensing deals and the part sale of its food retailing arm to Marks & Spencer, kept that stock in favour.’
However, Ocado's stock could have overreached itself in 2019. Among the analysts it carries an average price target of 1,210p - a 4.4% downside on the current price.
Persimmon share price
Persimmon's [PSN] share price gained 38.88% last year and there could be more growth to come in 2020. Fundamentals such as not enough houses for desperate would-be homeowners remain. Throw in an easing in Brexit uncertainty and 2020 could be a good year for homeowners.
Still, analysts seem unsure. Persimmon carries an average 1-year price target of 2,602p - a slight 2.9% decrease on the current level. Investors interested in Persimmon should also watch Barratt Developments and Taylor Wimpey. Over election week, Barrett gained 13% and Taylor Wimpey 11%.
Rolls-Royce share price
Rolls-Royce [RR] didn't have the best 2019, with its jet engine models grounded across the world. Yet City AM rates them as one of their picks for 2020. The paper noted in its picks for the year that a turnaround plan is 'on course to start bearing fruit imminently'.
An average price target of 890p would deliver a hefty 32% upside on Rolls-Royce's current share price.
JD Sports share price
JD Sports [JD] was the FTSE 100's undoubted champion in 2019, delivering a huge 139% gain. The athleisure boom and expansion into the US both saw the stock run laps around the competition.
Yet it looks like JD Sports’ share price won't be able to repeat last year's performance. Analysts tracking the stock on the Financial Times have an average price target of 790p. This would be a 2.1% downside on the current share price.
Where the FTSE 100 will end in 2020
So can the FTSE 100 hit a record-setting level of 8000 this year? A poll of 800 Interactive Investor customers saw 47% say it will finish between 7500 and 8000, while 19% think it will break 8000.
AJ Bell's Russ Mould is one analyst who thinks that the FTSE 100 stands a chance of breaking the 8000 level. Mould points to the availability of cheap stocks that could tempt foreign investors.
'Even if some of the earnings forecasts upon which those multiples are based prove optimistic, it is still possible to argue that you can buy good quality UK-listed firms cheaply, especially if you are an overseas investor, with sterling still relatively depressed.'
“Even if some of the earnings forecasts upon which those multiples are based prove optimistic, it is still possible to argue that you can buy good quality UK-listed firms cheaply, especially if you are an overseas investor, with sterling still relatively depressed” - AJ Bell investment director Russ Mould
For example, Centrica carries an 8.4x earnings per share ratio and a 33.9% estimated share price growth for 2020.
Yet, Ben Yearsley, director of Shore Financial Planning, is more circumspect. Yearsley's target is 7850, noting:
'I'm actually going to stick with a similar figure for the end of 2020, 7850, as domestic UK stocks rallying will be slightly offset by a pullback in overseas earners. As ever though take any FTSE prediction with a large pinch of salt.'