Confused? You will be

By DAVID BUDWORTH
Updated:

 

IF the recent stock market slump has left you feeling confused about the future direction of UK shares and interest rates then you're not alone. Highly paid City fund managers, whose jobs depend on making the right predictions, are equally perplexed.

A survey of a dozen leading fund management groups by WiseUp, an offshoot of independent financial adviser Bates Investment Services, reveals a huge disparity in forecasts for the blue-chip FTSE 100 index and on interest rates. The only thing fund managers can agree on is that they disagree.

The message for investors, says James Dalby, head of research at Bates, is that they should ignore the crystal-ball gazing that litters the pages of newspapers and magazines when shares go into freefall.

Instead they should take a long-term view of at least five years. He says: 'It could be a bumpy ride in the short term but it is right to hold your nerve to reap the long-term potential of the stock markets.'

Most fund managers who took part in the survey are confident that the Footsie will break through the 6000 level by the end of this year (it is currently around 5600). But that is where the consensus ends.

The most pessimistic prediction is that the index will get no higher than 6000, while one raging bull, Aberdeen Asset Management, is hoping for 7250 - a jump of more than 25% from its current level. For the end of 2002 the range for the Footsie is from 6500 to 8000 - a 23% difference.

The fund managers also agree that further rate cuts are on the cards, but differ widely on how low the Bank of England will go. Base rate predictions range between 5% and 5.6% at the end of this year and between 4.5% and 6% by the end of 2002. The rate currently is 5.75%.

Looking globally, the UK, Emerging Markets, Japan and Europe are all tipped to do well on a 12-month view. But fund managers disagree on which of these markets are likely to stage the strongest recovery.

To be fair, making predictions is notoriously difficult. The only guarantee is that you're likely to get it wrong. Which is why most of the fund managers who took part in the survey were unwilling to have their names attached to their predictions.

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