Here we ask some fund managers, and some other City insiders, their forecasts for the blue chip index in 2012.
Colin McLean, SVM Asset Management
The FTSE 100 could end 2012 lower, as the global economy cools and deleveraging in the Eurozone proves painful. Commodity prices could be a casualty of this, and the FTSE has more exposure than most markets to miners. But, by the year end we could see money printing in Europe, and we expect the US economy to recover steadily.
While I expect weakness in resources, other businesses with US Dollar denominated earnings should do well. The FTSE 100 Index could fall to 4800, but as with this year, there will be many winners within that.
Tom Stevenson, Fidelity Worldwide Investment
The FTSE 100 has been range bound since the summer between 5,000 and 5,500, having been trapped in a higher range for the first half of the year. I am reassured by the fact that at the bottom of the range the index has gained quick and significant support despite a steady flow of poor news, especially about Europe.
This suggests to me that investors are attracted by the yield and valuation support at 5,000. Short of a disorderly collapse of the euro (in which case all bets are off) I think this level of support will hold. By historical measures the UK market is not expensive and the search for yield in a low interest rate environment will continue to make blue chip shares an attractive option for income seekers.
Unfortunately I do not see the conditions being in place for a meaningful upward re-rating either as long as austerity remains the watchword. Earnings have held up well but margins could be under pressure next year with no region in the world an obvious candidate to fuel global growth. I would be surprised if the FTSE 100 rose above 6,000 or fell below 5,000 next year.
Tom Biggar, TQ Invest
There is a strong view that we will have another sideways moving market in 2012 with continued volatility similar to that seen this year.
Dull, defensive and boring appears to be the new vogue for investors and I believe we will need more of the same attitude next year. Funds that control their risk and show an emphasis to preserving capital on the downside will remain popular.
There is a growing demand for income and in a year where capital growth forecasts are pessimistic, total returns from income and growth are the order of the day.
Andy Parsons, The Share Centre
We believe the UK stock market will continue to demonstrate bouts of extreme volatility whilst Europe continues to deliberate on how to sort out their financial crisis. We are however, cautiously optimistic for UK corporations which have a significant amount of their earnings driven from overseas operations, given the already healthy state of their balance sheets.
Tom Becket, PSigma Investment Management
The only thing certain about the direction of the FTSE next year is that is uncertain. Our view is that we can expect average long term returns from UK equities over the next five years, so somewhere in the region of 7pc per annum. Much of this return will come from dividends, with capital growth questionable in an uncertain environment for growth.
We expect 2012 to be extremely volatile, but ultimately positive, as investors shun low-returning safe-haven assets and tentatively reallocate to equities. We are hopeful that we could see the FTSE 100 re-reaching the 6,000 level by the end of next year, with a very wide trading range expected. It would be no surprise to see the FTSE start with either a '4' or a '6' at different times next year.
Stephen Barber, Selftrade
The FTSE 100 in particular is especially internationally focused, exposed to Europe, the US and the world. It is particularly vulnerable to the eurozone crisis which will rumble into next year and any weakening in the east. Investors across the world will be watching for a restoration of confidence in the eurozone, which could mean the difference between stability and meltdown. The future remains highly uncertain, but with this comes opportunities for investors. (source http://www.telegraph.co.uk ) For the latest updates on the stock market, visit Stock Market Today
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