City: Bull run in '93, or a case of mad cow?

TO MOST equity strategists Nick Knight, stock market guru at Nomura, seems like a madman. He has forecast that the FT-SE 100 share index will finish next year at 3,500. That's so far adrift from other forecasters that the description 'contrary thinker' hardly seems to fit any longer; he's got to be completely round the bend. To hit that target, share prices have to rise by more than a quarter from their present level. At best, most other forecasters are predicting no more than a 10 per cent rise.

So why is he so out of line? Well, for a start, everyone's got it wrong about next year, he says. It's going to be a much stronger recovery than people think. The economic forecasters got it wrong during the downturn, when they were far too optimistic, and as likely as not they are wildly wrong about the upturn by being too pessimistic.

Don't worry about funding the budget deficit, Mr Knight says; it won't be nearly as large as everyone thinks. Nor will the international situation be the dampener most predict. German interest rates will be on the way down shortly, fending off looming recession in Germany and France. With economic recovery already well under way in the US, all is sweetness and light. And a merry Christmas to you, too, but can Mr Knight really be taken seriously? He has had some good calls over the past couple of years and last week's surge in shares, taking many to record highs, seems to augur well. Let's hope this one doesn't prove a call too far.

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