Year-end FT-SE 100 predictions and tips for investors

ROGER NIGHTINGALE

Economist, WI Carr

I DON'T KNOW why the market's fallen since February, but I'm not prepared to accept arguments like fear of rising inflation and liquidity shortages. Virtually everyone I know has reduced their inflation forecasts, and we have a liquidity surplus - although people are very, very nervous about committing their money to the bond market.

The market is probably headed further down - if the principle determinant is hedge fund operators who extend trends.

But then we should see a nice bounce.

DAVID MANNING

Director, Legal & General

WE OBVIOUSLY HAVE a value driven market where all the people who bought bonds last year - and probably should not have - are selling them.

Equities went up on the back of bonds, and have come back on the back of bonds.

For equity markets to come back higher, they will have to detach from the bonds.

Our forecast for the index is 3,400 for 12 months' time.

If the bond markets stabilise, we could see that happen before Christmas.

DAVID CHARTERS

Managing Director,

Investment Research

WE ARE in a normal bear market, where shares fall, then rally, then fall again.

We'll see support for the Footsie at the 2,800 mark. Then we're into the rally phase.

The market will stop worrying about inflation - for which there is little evidence, beyond a few rises in oil and other commodity prices.

It will be a sharp rally, because it has been a sharp fall.

Next year, we'll go into the third phase of the bear market, and shares will fall again.

MICHAEL MARKS

Chief Executive,

Smith New Court

I THINK the market will steady and be around 3,200 by the end of the year.

The turmoil in the bond markets is a function of a liquidity crisis that could be being overdone. Bonds were hugely overbought.

When the markets reassert themselves, I think UK equities will offer reasonable value - barring political upsets.

ALISTAIR ROSS GOOBEY

Chief Executive, Postel

AT THESE SORTS of levels, the equities market is offering reasonable value - but nothing spectacular.

To be irresistible it would have to fall another 10 per cent. At that point it would be worth taking out a loan to invest.

We need stability in the bond markets for people to regain confidence.

I don't think there's anything in the fundamentals for bonds to collapse further.

Inflation will rise cyclically, but we won't see the excesses of the late 1970s or late '80s.

BRIAN WINTERFLOOD

Managing Director,

Close Brothers

I MUST ADMIT, I don't understand it.

Most economic situations look favourable. It's a hedging boom, and it won't go away.

I think the market looks outrageously cheap, but I can't say 'buy equities' because the pattern looks so wrong.

We are doing no business, and I don't expect anything to happen until September.

ROBIN ASPINALL

Chief Economist,

Panmure Gordon

I THINK that the market is heading towards a low of around 2,300.

At this point, I see no reason to revise my year-end forecast, made at the beginning of the year, of 2,800.

The turmoil in the equity markets has been caused by a liquidity crisis that was caused by the bursting of the speculative bubble, and the overhang of positions typified by the hedge funds.

And at the same time, governments are continuing to draw on what little liquidity is available.

DAVID SCHWARTZ

Stock Market Historian

COMMENTATORS talk of inflation and interest rate fears. But the more basic truth is that stock markets rise in only six years out of every decade.

The 10 increases in the 1980s were an aberration. For the rest of the year, history again provides the answer.

Big advances, such as the one in 1993, followed by two month- long declines, as we had in February and March, are followed by extremely poor trading conditions for the rest of the year.

The initial two-month fall averages about 50 per cent of the year's total decline.