Brokers and money managers struck a bullish note yesterday about the market's prospects, forecasting yet more gains for equities despite mounting fears of a slump in growth and the possibility of new sub-prime skeletons in 2008.
Investors will be rooting for Lehman Brothers, which reckons that the FTSE 100 will climb to a high of 7,300 by the end of next year, predicting a rise of more than 800 points on yesterday's closing level of 6,497.8. The American investment bank, which expects GDP growth to drop down to 1.7 per cent, said that a recession was unlikely, highlighting the prospect for UK equities such as those from the real estate and retail sector, which it believes are already trading at recessionary multiples and should therefore ride out a slowdown.
The bank said: "Back in the early 1990s, along with a recession in the housing market as well as the wider economy, with sterling pegged to the German mark, interest rates were unable to respond. This time round, both the currency and interest rates are more able to respond to signs of weakness in the domestic UK economy... we think the outlook for the UK market is encouraging."
Lewis Charles Securities was also optimistic. The stockbroker's chief exec-utive Stavros Loizou said: "I still think we are in a bull market, albeit at the top of the recent trading range. Therefore we could go one of two ways, 5,800 or 7,200. I will go for 7,200." The firm erred on the side of caution last year, when it forecast a flat 2007, predicting that the FTSE 100 would end this year at the 6,100 mark.
Phil Wagstaff at Gartmore Investment Management agreed. "Global growth and corporate earnings remain positive and the lagged effects of interest rate cuts in the US and the UK should have begun to take effect by the second quarter," he said.
Hargreaves Lansdown, which forecast a record 2007 for the index, expect-ing it to reach 7,000, was conservative compared with its peers. The broker still thinks that the index of the 100 leading shares will grow, but only to 6,900 by the end of 2008, 400 points behind Lehman's prediction. Hargreaves expects the first half of the year to be "challenging", but said the market should bounce back in the second half.
Capital Spreads was at the back of the queue with its prediction of 6,800 for the end of next year.
Of last year's forecasters, JP Morgan wins the wooden spoon for the second year in a row. The investment bank's prediction of 5,850 was almost 650 points off the mark from where the FTSE 100 closed last night.Reuse content