We are starting to see confidence slowly returning as far as equities are concerned, and the market is re-rating. We think the risks are to the upside. It is difficult to see what could derail the market at the moment.
Any companies with exposure to big ticket items are struggling -- it could be a sign that UK consumers are tightening their belts. We are steering well clear of that sector.
We conclude that the FTSE 100 could make it to a new high of 7000 by the end of 2007.
We do not think these strong gains have been irrational or speculative, they are based in fundamentals.
We are still positive on the outlook - the market is taking a breather. All the fundamental drivers are in place for the market to move higher.
All the drivers of M&A activity are firmly in place. We see another good year for M&A activity. The type of M&A will continue as well with foreign buyers coming into the U.K. and private equity buyers (also) coming in.
M&A in the UK is not just focussed on a couple of sectors, it is across the board -- that tells you valuations are on the low side.
An oil price that is not too hot or not too cold is an ideal scenario for the FTSE 100 and that is exactly what we have got at the moment.
It looks like confidence has slowly returned to the equity market. We have seen very strong growth indicators and more benign inflation indicators -- that is an ideal scenario.
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