After a 10.41% year to date fall in the FTSE 100 growth manager are now confident of a rebound in it...
After a 10.41% year to date fall in the FTSE 100 growth manager are now confident of a rebound in its fortunes.
Eric Moore, UK fund manager at Gartmore, believes the outlook for equities is positive on a 12 month view.
He says: "Interest rates may have to go up before they go down. Growth is slowing but is still positive, inflation is under control and the fiscal position is very strong. The economy is in good health and compared to previous cycles is very benign. It is supportive for equities both in the UK and abroad."
Jeremy Rigg, UK equity portfolio manager at Investec, agrees the 12-month view for growth remains favourable, with inflationary pressures under control.
"Interest rates could start to fall towards the middle of next year and this should provide much needed support to the equity market," says Rigg.
The FTSE 100 has had a wobbly time over the past three to four weeks, Rigg says. However, he believes in the coming 12 months the FTSE 100 will move higher than its current levels.
Patrick Evershed, director of Rathbone Unit Trust Management, has a more cautious view. He believes the index, now at 6208, will trade between 6,000 and 6,500 over the next 12 months. He says the value end of the market has been left behind in the past five years.
Rigg expects growth stocks to perform well in the next 12 months as investors continue to seek exposure to above average earnings growth. He says cyclical industrial stocks will not perform well until the early part of next year and then only if the currency weakens. He also points out that the recent weakness in growth stocks has brought many valuations back to more attractive levels.
Rigg adds: "Defensive stocks are performing well at the moment, in the short term there continues to be demand for them but moving towards the end of 2000, growth stocks should take up the running again."
Moore believes that the shape of the market will have changed significantly by this time next year. "There will be new names in the market," he says. "The proportion of technology stocks in the FTSE 100 will be higher. There will be companies like Autonomy joining shortly, coming up from the 250. Some industrials will be out of the 100, continuing the trend of last year."
The index is seeing more consolidation, says Moore, who believes it will become even more top-heavy. He points out that it is already top-heavy with stocks such as Vodafone commanding some 11.58% of the index and BP taking a 9.66% share. Glaxo Wellcome and SmithKline Beecham will be merging during the year and will take up a further 8.62% of the FTSE 100. The focus of the index should be on the dominant three or four companies, says Moore. The outlook for Vodafone is positive, he believes.
"The future trend of an increase of data over mobile networks is prompting a rise in average revenue per user," says Moore, In the industry, Vodafone is the most attractive mobile operator on the planet. The Glaxo merger will create the largest pharmaceutical on the planet. It has a good portfolio, its pipeline of new products is in reasonable health but pharmaceuticals are reasonably fully valued."
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