Five reasons the UK stock market will rise in 2011

1. VALUATION Despite the strong rise in equities since the start of the current bull market, valuations are not stretched. Last year, the equities delivered a total return of 14.5% but the PE ratio for the market fell because earnings rose more than share prices. The consensus for earnings growth in 2011 is about 20% which, if achieved, leaves the market on a modest PE of 11 xs. This is supported by a reasonable dividend yield of about 3% that is attractive in a low return environment.   2. STRONG CORPORATE BALANCE SHEETS Unlike the private sector and governments, companies are...