But Richard Peirson, director in charge of UK institutional funds at Kleinwort Benson, said: 'We are not in a 1987 situation. The economic background is very different.'
He said the risk for private investors at the moment was not having enough exposure to the stock market rather than having too much. He believes the UK stock market will end 1993 higher than it is now and go higher again next year.
Many private investors agree with this, while others have been reluctantly driven back into the market by the falling interest rates at banks and building societies.
Several investment trusts launched recently have been swamped by private investors' cash. Henderson Touche Remnant's Japanese Smaller Companies Trust and Fleming's Chinese Trust had to turn away private investors.
But Justin Urquhart-Stewart, a director of Barclays Stockbrokers, said the enthusiasm for new issues was misplaced. 'The rush into new issues is most worrying - it's like betting once a year and doing it on the Grand National, the riskiest race in the calendar.'
He believes private investors should be looking at broadly based investment trusts with UK and European exposure.
Kean Seager, of Bristol-based advisers Whitechurch Securities, said it was significant that during the past week there were heavy volumes of business in the stock market on the days the market rose, but only light selling on the days it fell.
But he was sanguine about the index hitting new highs. 'If the market is trending up, then for a good bit of the time indices will be at an all-time high.'
But he advises those sitting on cash to buy selectively with a long- term view. There is no point buying today with the aim of selling at a profit in a week. He believes equities will bring a return of about 15 per cent over the coming year - capital growth of 11 per cent plus dividend income of 4 per cent.
Matthew Orr, of stockbrokers Killik & Co, said enthusiasm for the stock market was partly fuelled by expectations of further cuts in interest rates in the UK and Europe.
The market, he believes, is in transition between people buying shares for the dividend income and investors looking for greater earnings from companies.
'There is a potential for a wobble between now and when the market is underpinned by dividend growth. But I would be a buyer into the wobble - say a drop of 250 points. But I am buying selectively at the moment. We are looking at the big blue chip stocks like Glaxo, BAT and Cable and Wireless. I also like the insurance companies - we all know what's happening to insurance premiums.'
Mr Seager says that the enthusiasm for investment trusts, which is eroding the discounts, means that investors can now consider unit trusts and investment trusts more equally than before, when shares held by investment trusts were effectively being bought on the cheap.
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