And the City's pundits are feeling bullish again this year; 7400 seems to be the magic number with a clutch of brokers, including Credit Suisse and UBS, setting this as their year-end FTSE 100 target. That level would put the UK market on a forward earnings multiple of around 14 times and imply a prospective dividend yield just shy of 4 per cent. It would also imply another good year for the market with a 10 per cent gain, and that this is the year that the FTSE 100 will make history and finally smash through its 1999 high of 6930, which it is trading tantalisingly close to at present.
So why the optimism? "Equities remain the cheapest of the major asset classes," says Credit Suisse which tips global equities to remain on an uptrend until they became clearly expensive versus bonds or risk appetite leaves its present 'neutral' zone and enters the 'euphoria' zone. The broker believes that lowly geared balance sheets create a big buyer of equities in the shape of companies themselves with a purchasing power of around $2.2 trillion of US and European equities were they to gear up again.
N+1 Singer echoes the positive sentiment: "The start of 2014 seems imbued with an even more upbeat mood; the first glimmerings of eurozone recovery, more realistic forecasts in some sectors and the thought that UK elections next year will lead to an element of pump priming to add to what are already relatively strong consensus growth forecasts." But the broker cautions that a strong run in some sectors last year and fallout from the end of quantitative easing means shares that trade on stretched ratings could be vulnerable to disappointment and some early-cycle plays could face a headwind due to fretting over an eventual move up in interest rates.
Credit Suisse, meanwhile, highlights risks, including China growth surprising on the downside, corporate overspending and a shock European political event. The broker also points out a country-specific risk for the UK market: that the FTSE 100 index has limited exposure to the actual UK economy. Credit Suisse flags up that 80 per cent of FTSE 100 company earnings come from overseas, which can be bad news when the UK economy strengthens (as it is expected to do this year) because stronger sterling means lower translated profits.
For this reason, when it comes to stock picks, Credit Suisse likes UK domestic plays that will benefit from the growing economy and supportive government policies such as Help to Buy and Funding for Lending, without the foreign-exchange risk. The broker's top picks are ITV, Whitbread, Kingfisher, Tesco, William Hill, Capita and Barratt.
Analysts at N+1 Singer have compiled a bottom-up list of 'Best Ideas' for 2014. Among the favourites are engineer Bodycote due to its exposure to a pick up in industrial demand, investment management company Brewin Dolphin for its improved operational focus, an oversold-looking Dialight and infrastructure play Hill & Smith. N+1 Singer's other top picks include semiconductor manufacturer IQE, JD Sports for its positive momentum, Marstons for an improving business mix, industrial demand play Trifast and UDG Healthcare for its growth story.
Over at Cantor Fitzgerald there is some caution on the broader equities market, with the broker noting relatively high valuations exiting 2013 and the potential for "increased market volatility in 2014". With this in mind, analysts at Cantor have picked stocks that offer attractive valuations and strong fundamentals that should provide good returns even in the absence of broad market support. The broker's UK picks include Rolls-Royce, which it tags a "genuine growth stock", Dunelm for its roll-out story, Babcock International for solid growth prospects, Ryanair for earnings upside from brand up-scaling, Reit LondonMetric, Ferrexpo for organic growth and Gulf Keystone Petroleum, which is eyeing a move to the main market.
Rolls-Royce is also a favourite of Killik & Co, with the broker also keen on HSBC, Unilever, InterContinental Hotels, Berkeley, Quindell and 888. The broker believes that UK small-cap equities look particularly interesting right now due to their propensity for faster growth, the ability to include Aim stocks in Isas and their M&A potential. Staying on the M&A theme, Peel Hunt has drawn up a list of UK mid- and small-cap companies that may be takeover targets this year. These 'Top Target' stocks are Beazley, BTG, Chime Communications, Dechra, Morgan Advanced Materials, Perform, Shanks, Sportech, Tullett Prebon and Xaar.
And if you are looking for further investment inspiration, take a look at our very own Tips of the Year for 2014. After all, our tips of the year did return a very respectable 31 per cent in 2013.
