• The recent gains in equities are due to a change in sentiment and investment horizons after the wa...
• The recent gains in equities are due to a change in sentiment and investment horizons after the war on Iraq. Investors are now prepared to take a longer-term view of 12-18 months.
• Reports from the market and CEOs suggest the economic situation is not getting worse. The economy has bottomed and we will see an improvement in earnings in 2004 and 2005.
• Further easing in monetary policy is likely this year.
• Small and mid cap performance depends on GDP growth, which the UK is likely to deliver in 2004, thus sustaining the market rally.
• Companies have been cutting their cost base so that even a small increase in volumes will result in a rise in earnings.
• UK companies can be expected to deliver high single-digit returns and high dividend cover.
• Corporate activity such as mergers and acquisitions are likely to increase in the smaller companies arena.
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