It's the season for 2014 predictions - and one of the most popular calls among analysts is a record-breaking performance by the FTSE 100 (FTSE International: .FTSE), the U.K.'s main stock market index, next year.
Many are predicting the index will beat its previous high of 6,950, set back in 1999. While it has never scaled 7,000 before, strategists at Citi (NYSE:C) forecast it will reach 8,000 next year.
This optimism is not just because the U.K. economy is showing signs of improvement -- the Office for Budget Responsibility upgraded its forecast for gross domestic product growth in 2013 from 0.6 percent to 1.4 percent -- there is an international aspect to the optimism. After all, 80 percent of earnings by FTSE 100 companies come from overseas, according to Credit Suisse (Swiss Exchange: CSGN-CH). And 53 percent of the FTSE 100 is held by investors from outside the U.K.
(Read more: U.K. economy to return to pre-recession levels in 2014 )
Following a nervous start to the year, the FTSE 100's overall performance for 2013 has been strong, with a peak of 6,875.62 in May amid central bank stimulus. The index has faltered in December, and is on track for its first declining December since 2002 if it ends the month below 6,650, according to City Index.
One of the most bullish calls is by strategists at Citi, who think the index will hit 8,000 - more than 14 percent higher than its previous record high. They think that there will be particularly strong earnings growth next year in cyclical sectors like construction, automobiles and retail, with technology hardware also performing well - and a corresponding flow of funds into equities.
Peter Oppenheimer, chief global equity strategist at Goldman Sachs (GS), predicts that the FTSE 100 will have hit 7,500 by the end of 2014, boosted by a stronger U.K. recovery.
(Read more: Reasons to stay bullish on equities: Goldman Sachs )
Central banks have injected huge sums of liquidity into the market, and kept interest rates at historic lows - meaning that investors are more motivated to put their money into shares rather than keeping it in low-growth savings.
With mergers and acquisitions still relatively low, companies have more money to return to shareholders. The FTSE 100's average dividend yield is expected to rise to 3.6 percent this year, from 3.3 percent in 2012, according to Citi analysts.
"The only way is equities," they argued.
- By CNBC's Catherine Boyle. Twitter:
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