It seems there are two techniques you can employ for judging which way the markets will move next year. You can obtain a piece of paper and write ‘up’ at one end, and ‘down‘ at the other. You can then place a blindfold, lightly, but firmly, across the face, ensuring your vision is entirely obscured. At this point, a second party should hand you a pin, guide you so that you are near the piece of paper, and then after using your sense of touch to ascertain the precise whereabouts of the paper, you can lower the pin until it is protruding from the paper. Once you have followed this procedure, you can remove the blindfold, and using either a ruler, a tape measure, or perhaps your own judgement, estimate which of the two words, ‘up’ or ‘down’, the pin lies closest to.
For further details on this technical procedure, contact an experienced investor.
There is a second approach. You can ask a random selection of fund mangers what they think.
The Association of Investment Companies tried the second approach.
Its conclusion: just under two thirds of fund managers (62 per cent) were optimistic that markets generally will rise in 2009 but a significant 38 per cent of managers disagreed. There was a diversity of views on where the level of the FTSE 100 would end up in 2009, with most managers (54 per cent) expecting the index to close between 4500 to 5500, but 23 per cent expected the index to close below 4000.
Not surprisingly, the majority of fund managers (54 per cent) thought the global recession was the single greatest threat to equities over the coming 12 months, with the lack of liquidity caused by the credit crunch the second most popular choice (25 per cent), and the lack of consumer spending the third concern (13 per cent). These were very similar to last year when fund managers’ greatest concerns were lower GDP growth and the credit crunch.
When fund managers were asked what gave them the greatest cause for optimism in 2009, “attractive valuations” was the most commonly cited factor (44 per cent), followed by their belief that liquidity will come back at some point in 2009 (32 per cent).
Blue chips are the preferred sector for the savvy fund managers. Somewhat surprisingly the region they expect to see the best stock market performance is the US, with the East, excluding Japan, in second place.
Fund managers were very keen to increase their gearing levels in the first six months of 2009 with 46 per cent planning to increase their gearing, in comparison to just 17 per cent last year. A third (33 per cent) are taking a ‘wait and see’ approach to increasing gearing and 21 per cent said they had no plans to change their gearing levels. Interestingly no managers were keen to decrease their gearing, whereas last year 11 per cent of managers planned to decrease gearing.
Bruce Stout, manager of Murray International said: “Companies will be reporting bad news for months to come as the financial crisis hits the real economy. Most stock markets around the world will not start to recover properly until the second half of 2009. However, in the case of the UK it may take longer; being hindered by a huge debt mountain, rising unemployment and weak currency. That said, for investors willing to take the pain of short-term fluctuation, attractive long term investment opportunities are appearing around the world.”
Somewhat surprisingly, no one questioned mentioned the pin technique, although Mystic Meggana from the Ouija Fund Managers, did say the formation of the stars suggested stock would be flat next year.
© Investment & Business News 2013