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David Jane: FTSE to hit 6,000 by year-end | Trustnet Skip to the content

David Jane: FTSE to hit 6,000 by year-end

10 September 2012

The manager of the TM Darwin Multi-Asset fund says that even though the fate of the eurozone remains in the balance, he expects markets to continue edging up over the next few months.

By Alexander Paget,

Reporter, FE Trustnet

The upturn in market sentiment is likely to send the FTSE 100 past the psychological 6,000 barrier by the turn of the year, according to David Jane, manager of the TM Darwin Multi-Asset fund. 
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His comments come in light of a recent FE Trustnet poll, which found that almost one in three of our users also expect the index to breach 6,000 for the first time since July last year. 

"In all honesty, we were at 5,800 points in March so I can certainly see the FTSE rising 200 or so points in three months," he said. 

"We were over-selling earlier in the summer and we became overly bearish. Since then we have been feeding more risk-on investments back into the portfolio." 

Jane, former head of equities at M&G, believes this week is crucial for the fate of the markets, and thinks investors will have a clearer picture of where the FTSE will be after both the German and Dutch elections. 

However, overall the manager was optimistic about the potential for the market to rise further.

"If you had to play a game of higher or lower, I would go higher than the current level," he added. 

Twenty-nine per cent of the 1,160 respondents to the poll agree with him, while only 16 per cent believe that the index will fall below 5,500 in the next three months or so. 

At the time of writing, the FTSE is currently poised at 5,793 points, consolidating the gains it made last week following Mario Draghi’s proposal to buy short-term government bonds from Europe’s peripheral countries. 

Other macro issues such as the Fed’s decision to start a new phase of quantitative easing have also contributed to rising markets. 

Brown Shipley’s Kevin Doran agrees that in general the plans should be greeted with optimism.

"Let us be clear, in itself the announcement does not allow us to declare the European debt crisis over, it does however represent the first plan from the central policy makers/politicians that has the genuine potential to make a real difference," he said.

"In lowering the cost of borrowing for the programme nations, this helps contain the interest charge on existing (and future) budget deficits." 

"In doing so, this allows for debt sustainability, whilst also ensuring that the respective governments maintain/regain access to capital markets." 

Doran also believes Draghi’s implementation of the proposal will support the current banking system.

"By offering a plank of support to bond valuations, the holders of such issues (predominately banks) will be provided with a degree of certainty as to the assets' valuation."

"This ought to avoid the need to make panic disposals and offer investors greater clarity in respect of the assets heALT_TAGld upon bank balance sheets." 

"In a low interest rate environment and with yields on other assets at historic lows, this ought to lower the cost of capital for the banking sector." 

Head of communications at AWD Chase de Vere Patrick Connolly (pictured left) is sceptical that the FTSE will be able to reach the heights that so many are forecasting, and instead thinks there will be a period of market consolidation.

"People’s views tend to move quite quickly due to short-term movements, as we’ve seen over the events of the last week," he said. 

"However, I am surprised that so many believe that the FTSE will be above 6,000 points as it has traded between its current bracket of 5,500 to 6,000 for some time now. It hasn’t tested the upside or downside of those boundaries for quite a while, so I’d be a little more cautious."

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