After the FTSE 100 fell to 5,266 yesterday, where will it close at the end of the year?
LOWER
Glen Jones
The UK has entered into a double-dip recession. However, the FTSE 100 isn’t just a reflection of the UK market, it’s a proxy for the entire global economy, as a large proportion of its revenue streams come from overseas. The bullish recovery from the lows of last summer has been curtailed quickly by a weakening global economic picture. In the Eurozone, Greece continues to dominate the headlines with a resolution no nearer, Spain is in turmoil, with unemployment incredibly high, and Italy has major fiscal and political issues. Outside of Europe, the Brics have suffered, with China slowing and the real, rupee and ruble all falling significantly. Japan is still a mess, with its debt to GDP ratio at 239 per cent. The only possible saving grace is the US. This all indicates that the FTSE will fall further, and I predict it will be close to the 5,000 mark by the end of the year.
Glen Jones is deputy head at Growth Equities and Company Research (GECR).
HIGHER
Tom Elliott
The FTSE 100 closed today 11.7 per cent down from its year-to-date high of 5,965, reached on 16 March. In what scenario could we see these losses reversed? First, Europe. A commitment towards “more Europe” from leading politicians would reassure investors. Perhaps starting with a “growth compact”, but with the end goal of creating full fiscal union via the issue of Eurobonds. Such an announcement would be very positive for risk assets. Second, the US. Recent data has been a little inconsistent, fuelling fears over the sustainability of the recovery. But such fears are overdone given the Fed’s willingness to address any slippage with more quantitative easing, and reasonably strong bank credit growth to the household sector. Sentiment may switch quickly if we were to have a short run of purely positive data.
Tom Elliott is global strategist for JP Morgan Asset Management.