Global equity markets have been steadily rising for some months and sentiment has improved on the back of a pickup in economic data and monetary easing policies from the Fed and the ECB.
However, many industry experts have warned investors to expect a mass sell-off in the market, claiming the current rally is propped up by euphoria and not fundamentals.
Yet despite the expectation of a consolidation phase, markets have held up
after events such as the deadlocked Italian election and the Fed’s recent statement regarding the slowing of QE3.Noffke (pictured), says that markets can continue to strengthen over the next year.
"I don’t think the FTSE can continue to rise 7 per cent each month but I think it will certainly end the year higher than where it is now," she said.
"There is enough positive data coming through to suggest that we can avoid the possibility of another prolonged downturn."
"Most managers will say that markets will have to consolidate, but I think it is less likely that there will be any real panic like in the spring and summers over the last couple of years."
According to FE Analytics, the FTSE 100 has returned 11.06 per cent over the last six months, and Noffke thinks this strong run will continue.
Performance of index over 6 months
Source: FE Analytics
"I was reading something from our economics team today that said they have taken the risk of the eurozone breaking up completely off the table," she said.
"Wobbles are becoming few and far between – as we saw that the results of the Italian elections didn’t extravagate through the rest of the markets or peripheral Europe."
"There could well be a digestion phase when the Fed takes away the huge amount of liquidity that has been pumped into the system."
"However, the market looks to anticipate this sort of thing and I think the release of the Fed’s minutes were aimed at doing that."
"I think this rally can hold and ultimately push through with the support of market confidence, new listings and M&A activity."
"Of course, this is offset by a general low-growth environment and the fact we are still relying on the US pushing forward with their fiscal issues."
"However, the chances are higher that they can get through that as the US economy and housing market are picking up."
Valentijn van Nieuwenhuijzen, head of strategy at ING Investment Management, says that any correction in the market in the coming months will only be short-lived and will not signal a damaging mass sell-off.
He adds that there is now more support for the rally in economic fundamentals.
"Investor optimism has seen an impressive increase over the past three months as equities hit new multi-year highs and investor sentiment approaches post-Lehman peaks," he said.
"We acknowledge the clear risks facing markets at the moment, but choose to stand our ground for now and remain overweight in equities."
"What is also noteworthy in the market dynamics so far this year is the shift from a liquidity-trade mentality – where all income-earning assets perform well and only commodities underperform – to a more fundamentally driven market."
"The latter is expressed by the outperformance of growth assets as long as the global cycle strengthens and the 'safest' assets producing the weakest performance."
"The latter is exemplified by the outperformance of high-Beta equities and negative returns in government bond markets, while the middle of the risk curve, like credits, moves sideways."
Industry stalwart Bruce Stout recently told FE Trustnet that the current rally lacks substance and is being driven by the surge in "junk" stocks.
His thoughts are echoed by Rob Jukes, global strategist at Collin Stewart Wealth Management, who says investors should not get too far ahead of themselves as there are still plenty of headwinds facing the market.
"What we saw last year was a reduction in tail risks – but what is left behind is a number of longstanding macro risks."
"The ECB and the Fed have effectively bought some time for the politicians to solve the problems," he said.
"Although markets haven’t lost their nerve over the Italian elections, the potential risks are still out there."
Jukes added: "There could be real issues if the central banks stop their monetary stimulus."
"Quantitative easing effectively puts a floor under markets – it doesn’t fix anything. Until the fundamental problems are fixed, like the sovereign debt crisis, the sustainable outlook for areas such as Europe looks very challenged."