Private client portfolio manager Gerrard believes the question of whether the worst of the equity be...
Private client portfolio manager Gerrard believes the question of whether the worst of the equity bear market has passed is still to be answered.
Analysts at the group remain concerned at the sharpness of the rally in equity markets, particularly in the UK. They believe it can run further but see continued volatility, meaning a firm base, may yet be some distance off.
Jim Wood-Smith, chief analyst at the group, says: 'The rally can run further. Indeed, a run all the way to the previous low points reached on 21 September looks more likely than not. This is roughly 4,400 for the FTSE 100 and 950 for the S&P 500 index.
'These levels would have to be comfortably surpassed before we can be more confident a new base has been set. Until then, there remains an ongoing risk of another downward leg to the bear market.'
On a more positive note, he adds: 'As yet, there is no obvious catalyst for this and, as we have argued, the background to the market may be stabilising.'
This background is little changed by the Federal Reserve's decision not to cut interest rates. Immediately following the news, however, jittery markets on both sides of the Atlantic slipped, with the S&P 500 dipping below 880 and the FTSE touching 4,160.
Clerical Medical agrees with Gerrard that the corporate picture in the UK is picking up.
While Gerrard cites good results from HBOS, Unilever, BP and BSkyB to support the argument, Clerical Medical has gone on record to declare that corporate results in the UK and US will improve. The group is also positive on the European equity markets, echoing the sentiment of JP Morgan Fleming (JPMF).
JPMF's global strategist Chris Tracey says: 'The FTSE 100 has made good progress. UK investors have been boosted by better-than-expected results from HSBC and Standard Chartered in the banking sector and by news of a further robust rise for house prices, although drug approval problems in the US for AstraZeneca provided some friction.
'Although the performance of European markets over the past few months has demonstrated that their valuation discount provides absolutely no protection at times of general panic, the attractiveness of European stocks, particularly in the financials sector, makes them likely to be at the forefront when global stock markets recover, whenever that may be.'
The macroeconomic backdrop to the markets is mixed, however, with news that German unemployment rose to a three-year high of 9.9% in July and German manufacturing orders fell more than expected.
Tracey says: 'Other European economic news has been poor, with the European Commission reducing its third-quarter growth forecasts and Italian second-quarter GDP coming in much weaker than expected.'
JPMF still believes Pacific region equities are well positioned to continue to outperform.
'In particular, Asian stock market valuations are attractive compared to those in the west, while Asian manufacturing companies continue to benefit from the secular rise in outsourcing from Japan and the west,' Tracey says. 'The combination of low valuations and increasing demand for Asian products and services is very strong.'
Valuations in Asia promise strong returns.
UK and US corporate recovery to emerge.
European equities look attractive.
Market bottom may not have been reached.
Sentiment remains fragile.
European economic backdrop troubled.
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
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