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Experts fear stock market rally is over

After making some bullish forecasts earlier this year, experts are now resigned to a disappointing 2004. By David Budworth

THE stock-market rally is officially over, say experts.

A few months ago, analysts and fund managers predicted that the FTSE 100 index of Britain’s biggest companies would be as high as 5,000 by the end of the year. The consensus of forecasts for the Footsie gathered by The Sunday Times in January was 4,750.

But the market has gone nowhere so far in 2004. The Footsie started the year at 4,477; six months later it is 84 points lower at 4,393.

The malaise has affected markets worldwide. America’s S&P 500 index, for example, is down 0.3% since the start of the year. The Dow Jones Euro Stoxx 50 index is up 0.6%.

Experts are warning investors to brace themselves for more of the same. Any hopes that the British market will stage a recovery in the second half of the year are likely to be dashed.

Mark Dampier of Hargreaves Lansdown, a financial adviser, said: “Most fund managers are expecting the market to go sideways. This is not a time to be piling into shares.â€

Analysts who look for patterns in share-price movements are reaching the same disappointing conclusion.

Mike Lenhoff, chief strategist at Brewin Dolphin, a stockbroker, said: “The FTSE 100 has fallen below its 200-day moving average for the first time since the ‘Baghdad bounce’ in March last year. This suggests the market is losing momentum and will continue to trade sideways.â€

The poor showing by shares comes at a time when corporate profits have been growing. Analysts have therefore been raising earnings forecasts.

But Jeremy Batstone at Charles Stanley, a stockbroker, thinks investors are already anticipating a slowdown. He said: “Corporate profitability has been good but it now appears to have peaked. Economic activity is expected to slow and interest rates are rising on both sides of the Atlantic. This will not be a good environment for equities.â€

Another problem is that the British market does not look cheap. Dampier said: “If the Footsie dropped a couple of hundred points, investors would become more bullish.â€

The continuing unrest in Iraq has also knocked consumer confidence.

Some experts are more upbeat — but not much.

Quintin Price, chief investment officer at Gartmore, a fund manager, thinks worries about interest rates, oil prices and a slowdown in China are holding the market back. But he believes these fears have been overdone.

He said: “Investors’ preoccupation with these three issues has led equity markets to perform as if the world were facing a recession.

“The reality, in our opinion, is quite different. We are confident that equity markets can make solid, albeit modest, progress over the course of the year.â€

Even the pundits who expect the market to go nowhere think that there is still money to be made, if you pick your stocks carefully.

Over the past six months, for example, 23 of the 34 sectors in the British market are showing a gain — and 10 are showing a double-digit rise, according to Brewin Dolphin.

The sectors that have done best are those where there have been the biggest earnings upgrades. Medium-sized companies in the industrial and consumer cyclicals sectors have been strong performers.

Lenhoff tips the big banks and telecoms stocks for success in the next six months. He said: “Attractive valuations exist for both sectors. So far this year the wider FTSE 250 index has beaten the FTSE 100, but I would expect to see a large-cap rebound.â€

Khuram Chaudhry, UK equity strategist at Merrill Lynch, would focus on shares that look good value and have a decent dividend yield. He said: “If a share pays a good dividend it can provide you with a decent return even when the share price is going nowhere.â€

He likes Pilkington, the glassmaker, which has a dividend yield of 6%. On Friday, its shares closed at 94¾p. AWG, the water utility, which yields 8% and costs 609½p, is another favoured stock. So is BAE Systems, the defence company. It yields 5% and costs 210p.

Chaudhry also tips banks such as Barclays, HBOS, Standard Chartered, Northern Rock and Alliance & Leicester.

Same crap then as there is now from the experts on here and elsewhere saying overbought, expect 20% slump etc...

I, at least get a good laugh on here :lol::lol:

Edited by shug

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“The big driver of that is home prices,†said Meyer, referring to his recovery forecast. “If home prices stabilize, that is a tremendous boost to housing that dominates every other variable in our equation. There is a lot of pent-up demand in that particular area.â€


Laughable. The emperors really have no clothes.

They employ so called experts to recite the same old tired arguments to cover up the looting in order to give them some kind of respectability. You would think they could come up with something better.

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