The professionals think the bear market may be coming to an end

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The Independent Online

After months of nail-biting plummets in the stock market when no one seemed to know just how low it would fall, investors are starting to regain confidence that equity values are set for a decent recovery.

Almost two thirds, 64 per cent, of people with financial investments that are linked to the stock market believe the market will recover its losses within the next five years, shows research by Abbey National this week. A quarter of people interviewed think the stock market will recover within two years, and nearly a fifth expect a recovery to take three years.

The change in sentiment matches a growing sense among heavyweight investment professionals that the tide on the stock market has turned. Two leading City stockbrokers, Teather & Greenwood and Walker Crips, said this week they believed the bear market was coming to an end. They reported that the number of people trading shares and showing an interest in investing had picked up significantly in the past few weeks, as investors began to realise they can invest in good-quality companies whose share prices are still low.

The stock market reached its lowest level for seven years in March, hitting 3,287. About half the respondents in the Abbey study think now is the right time to invest to benefit from a recovery and long-term growth. More than half, 56 per cent, said the present market represents good value because shares are cheap or underpriced.

Stuart Fowler, of AXA Investment Managers, this week joined other fund managers, including the highly regarded Anthony Bolton at Fidelity, in saying he thinks he might be seeing the beginning of a new bull run. Since its low point in March, the FTSE has surged 26 per cent as the end of the war in Iraq improves confidence. "What I'm finding now is that shares I've sold have continued to go up, to levels I never thought they would get to," Mr Fowler said. "This run in shares is what I'd expect to see when investor sentiment changes and everyone becomes more forward-looking and bullish."

But he injected a note of caution, saying that while new confidence does exist, there are still lots of reasons to stay level-headed. He is backed by those surveyed by Abbey National, 23 per cent of whom think it will take more than five years for the stock market to regain its lost ground.

"New positive items include a better environment for advertising in the US, improving corporate balance-sheets in the UK and the ongoing strength in the housing market on both sides of the Atlantic shows consumers are more sure about their prospects than sentiment surveys might suggest. But while we are still seeing the odd burst of forced selling driving down share prices and corporate profits growth remains relatively subdued, I'm not going to become too bullish."

Men are more likely to believe that now is the right time to invest than women, the Abbey survey shows, with 55 per cent agreeing compared with 46 per cent of women. People in Yorkshire and Humberside are more optimistic about the stock market's future than those in the South-east where only 49 per cent of people agree it is a good time to invest.

The younger investors, aged 16 to 34, are most likely to agree that equities are now a good, long-term bet, whereas older investors, aged over 65, are still more cautious. Regionally, the Welsh are most likely to agree that the market represents good value now and people in the East Midlands are the least confident that equity markets will improve.

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