L&G puts its head on block with 1997 Footsie forecast of 4,000; STOCK MARKET WEEK

Forecasting is a hazardous exercise; imponderables often make the most carefully researched predictions look utterly foolish.

So when David Shaw and his team at the Legal & General insurance giant produced a head-on-the block forecast for next year's Footsie performance it was only natural to insert cautionary qualifications.

L&G expect shares to romp ahead in the first three months and suggests that Footsie will hit a 4,400 points peak.

But from then onwards it will be downhill and the guess is that the index will then dip to 3,800, ending the year at 4,000.

With an election looming, such a forecast has to be hedged.

The direction shares will take must be highly problematic and Legal & General built four key assumptions into its forecast.

1) Labour will win the election with a working majority; 2) sterling's strength will be partially reversed; 3) world markets will fall back; and 4) institutions which have been betting against equities will pump some of their cash pile into shares.

L&G believes one of the first acts of a Labour government will be to cut ACT relief on dividends to 15 per cent which could clip 5 per cent from shares.

A Tory election victory would, of course, prompt a rapid rethink.

In the short term shares would shoot ahead with Footsie at something like 4,600 at the year-end.

L&G's view is a Conservative victory is only a 20 per cent probability against 50 per cent for Labour.

The L&G 1997 year-end Footsie forecast is at the lower end of expectations.

Some houses, including Chase, are looking for 4,400 and HSBC James Capel is on 4.350. Kleinwort Benson and UBS rest on 4,300. Nomura is banking on 3,800.

The rush by building societies and others to demutualise could have quite a significant impact on the stock market.

It is estimated that conversions will produce a pounds 21bn windfall, making tax cuts look rather trivial.

As building society members cash in their rewards, a great deal of cash will be pumped into the economy. But as the windfall from conversions is spent over the nation's counters, many institutions will dip into their cash coffers to buy shares in the new crop of quoted financial groups.

The rush to convert from mutual organisations into public limited companies will create huge waves of market activity; such action should be rewarding for market occupants as they bank their commissions. It could also help sentiment, providing the boost to confidence which often goes with heightened investment interest.

L&G makes it clear that 1997 will be far more difficult to call than this year. Besides the election there is also the realisation market values are looking stretched; hence the volatile reaction to US banking chief Alan Greenspan's worries about overheated share prices.

But if this year was less difficult to read 12 months ago a great many alleged experts managed to get it wrong. Remember as the year started there were high expectations of a flood of takeovers, driving shares powerfully to new peaks in the first half-year with the second six months much more subdued.

In the event the flood was little more than a steady flow and if action among utilities is stripped out the flow subsides to nothing more than a gentle trickle.

To the surprise of many the market enjoyed a golden autumnal surge, taking Footsie through 4,000 points.

No doubt this time next year, when many of the brave forecasts are being re-read, the perils of peering into the future will be once again played back.

But one thing is clear. The temptation to forecast at the turn of the year will remain as strong as ever. After all it can be very rewarding.

This week, as befits the nearness of Christmas, is long on hospitality - but short on company results.

MFI, the flat pack furniture chain reporting interim figures today, was once in the same corporate camp as Asda, the superstores group which has its half-year results on Thursday.

A management buyout from Asda nine years ago, MFI came to the stock market under its own banner in 1992 when shares were placed at 115p. They ended last week at 193p.

With talk of boom times ahead prospects should be encouraging with interim profits nearly doubling to pounds 39m.

Asda faces a challenging time. Under Archie Norman it has made an astonishing comeback but has already enjoyed the benefits of recovery and is now deep into the hard slog of building on its revival.

NatWest Securities estimates profits will emerge at pounds 153m, up from pounds 138.3m. But the headline figure should look much more impressive with Asda adding in the pounds 80m profit it made from the flotation of Allied Carpets.

Securicor has year's figures tomorrow. The security and parcels group which embraces a 40 per cent interest in Cellnet (said to be worth pounds 2bn) should offer modest headway, say pounds 106m against pounds 100.8m.

The Government has so far blocked attempts to sell the mobile phone stake to the major shareholder, BT. There is a feeling the restructuring in the telephone market could lead to another Whitehall U-turn. If the Cellnet interest was sold Securicor would be vulnerable to a predator.

The brewery season drifts towards its close with Vaux, the Sunderland group, expected to roll out pounds 35m, up from pounds 32m. The momentum should have been provided by its Swallow Hotels chain with the up-for-sale St Andrews nursing homes unlikely to have made a significant contribution.

Gibbs Mew, the Salisbury brewer, is due to produce interim figures today. Last year it made pounds 2.5m. But its shares are weak, bumping along at a 12-month low of 299p, suggesting the profits brew could taste a little bitter.

Suggested Topics
News
Jennifer Lawrence was among the stars allegedly hacked
peopleActress among those on 'master list' of massive hack
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
PROMOTED VIDEO
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
people'It can last and it's terrifying'
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
The eyes have it: Kate Bush
music
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Business Development Manager / Media Sales Exec

£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor