IFAs pessimistic about strong stock market growth in the UK, survey shows

News - Banking

Written by Ray Clancy

Friday, 19 March 2010 09:17

A W-shaped recovery and year of stock market turmoil lies ahead for the UK according to a survey of independent financial advisors.

Some 25% of IFAs expect wide fluctuations in stock market prices, with a further 24% expecting equity prices to stagnate, hovering between 5,000 and 5,500 points throughout this year, according to the survey by the Prudential.

While the majority of IFAs seem pessimistic about strong stock market growth, around one in five, 22%, take a more optimistic view, believing the FTSE index of leading shares will rise to between 6,000 and 7,000 points by the end of 2010. And just 4% of IFAs expect to see equity values fall in 2010, it found.

The findings highlight ongoing caution regarding the UK’s economic recovery, with official figures released in January showing 0.1% GDP growth in the fourth quarter of 2009.

IFAs questioned for Prudential expect the impact of the recession, now regarded as the worse since World War II, to continue for some time, with 71% believing it will have a long term impact on how clients look to invest.

‘Clearly IFAs are cautious about the growth prospects for the stock market in 2010 and expect to see fluctuations in share prices for most of the year. However, it is encouraging to note that just 4% anticipate stock market prices to fall and, for investors, it is worth setting this against the background of very low returns on cash based savings accounts and the speed at which cash savings are being eroded by rising inflation,’ said Andy Brown, Director of Investment Funds at Prudential.

‘In the current environment it is more important than ever to actively manage investments and aim for savings to be placed in better performing funds and that the balance between cash and equity based savings and bonds is weighted to suit investors’ short and long term financial needs, aspirations and risk profile,’ he explained.

‘While it is widely thought that stock markets will continue to fluctuate for the foreseeable future, there will be good opportunities and utilising a good fund manager and gaining financial advice is key if investors want to have the best chance of successfully riding a slowly rising market,’ added Brown.