Expert predictions for the UK market in 2011
Robert Talbut, chief investment officer, Royal London Asset Management: "Market wobbles will continue."
"I expect 2011 to be a further year on our move away from the 'great moderation', towards a higher degree of volatility in both growth and inflation. This continues to be a consequence of the unwinding of the excesses which led to the financial crisis and the fact that the global economy, while continuing to grow, is still vulnerable to some potential significant shocks.
"Prime among the risks are those surrounding sovereign debt and, just as we had several bouts of market wobbles in 2010 due to worries on the sustainability of the debt, I expect these concerns to return next year, and indeed for many years to come."
Gavin Oldham, chief executive of the Share Centre: "The FTSE 100 will break new ground."
"2011 will be the first for 12 years during which the FTSE 100 breaks into new ground, finishing the year at or above 6750.
"As businesses look forward to a leaner, more efficient post-credit crunch world, investment and earnings will rise on the back of continued low interest rates. However, the year will not be without serious volatility, particularly due to successive crises in the eurozone leading ultimately to some disorderly restructuring.
"A strong pound should also keep price inflation at bay, which is just as well as tax rises and higher unemployment will inevitably impact the standard of living. The retail and leisure sectors will therefore have another bad year. We favour Carillion, Centrica, Prudential and CPP.
"Our two favoured stocks for 2011 are Experian and, as our shortest term high-risk play, Churchill Mining."
Alex Breese, manager of the Neptune UK Special Situations fund: "Of all the developed countries, we are most optimistic for the UK."
"We believe the UK will exceed the pessimistic expectations for economic growth in 2011 because our core inflation level is higher than many other developed countries. This, in turn, is speeding up the deleveraging process.
"However, it is important to note that core inflation is not high enough to trigger interest rate increases, which would be problematic during a period of fiscal consolidation."
Jane Coffey, head of equities, Royal London Asset Management: "Equities will offer positive real returns."
"Over the medium term, it is likely that nominal GDP growth will be lower than it has been over the past couple of decades due to the necessity for consumers, banks and many governments in the developed markets to deleverage in the aftermath of the financial crisis.
"However, I continue to believe that the growth in China and the other major emerging markets will offer structural growth opportunities for developed market quoted companies and, given the attractive valuations of equities compared with their history and relative to bonds, I believe that equities will offer positive real returns and a growing income stream."
Julian Chillingworth, chief investment officer, Rathbone Unit Trust Management: "The euro could be a thorn in the side."
"The start of next year could see markets continue in volatile fashion as investors worry about G7 growth, and this will be characterised by the now familiar risk-on/risk-off trade. Emerging markets will continue to attract hot money, although we expect there will be a point when investors take stock and seek value elsewhere, for example, here in the UK.
"China will continue to be a crucial factor in swaying investor sentiment. Core European nations (Germany, France) will work very hard to uphold the euro, although the currency could prove more of a thorn in the side than not."
For more on what 2011 holds for investors read: Where should you invest in 2011?
This article was taken from Interactive Investor
A collective investment vehicle (known in the US as a “mutual” or “pooled” fund) and similar to an Oeic and investment trust in that it manages financial securities on behalf of small investors who, by investing, pool their resources giving combined benefits of diversification and economies of scale. Investors buy “units” in the fund that have a proportional exposure to all the assets in the fund, and are bought and sold from the fund manager. The price of units is determined by the value of the assets in the fund and will rise or fall in line with the value of those assets. Like Oeics (but unlike investment trusts) unit trusts and are “open ended” funds, meaning that the size of each fund can vary according to supply and demand of the units form investors. Unit trusts have two prices; the higher “offer” price you pay to invest and the “bid” price, which is the lower price you receive when you sell. The difference between the two prices is commonly known as the bid/offer spread.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).