Scott Logic employees got out their crystal balls this week to predict how the financial markets will perform over the coming year.

A record total of 21 employees took part in the competition, which has taken place for the last three years.  Using their knowledge of the financial markets, combined with a large amount of guesswork, entrants made their predictions about the values at which five leading market indicators will end 2010:

• FTSE 100
• Bank of England base rate
• Annual Inflation rate (RPI)
• £/€ spot rate
• £/$ spot rate

Given the recent turmoil in the markets, it is perhaps not surprising that opinion was sharply divided, with some feeling 2009’s recovery was set to continue, while others were more sceptical, seeing rising inflation in particular as a potential danger.

If the Wisdom of Crowds theory is to be believed, the FTSE will rise by 7% this year, Sterling will be broadly unchanged against both the Euro and US Dollar, and inflation and interest rates will both rise from their historic lows.  The predictions are summarised below.

FTSE 100:  4500 – 6950  (average 5801)
BoE Base Rate : 0.5% – 5.0% (average 1.7%)
RPI: 0.0% – 6.8% (average 2.2%)
£/€: 0.85 – 1.42 (average 1.17)
£/$: 1.38 – 1.83 (average 1.63)

How accurate will our predictions be? Check back in early 2011 to find out!

For the avoidance of any doubt, please note that this post does not constitute investment advice.