Analysts at Credit Suisse have lifted their year end targets for a number of major indices, despite a number of current uncertainties in the stock market, including tomorrow's Scottish referendum, sanctions against Russia, Middle East turmoils, concerns about the Chinese economy.
For the FTSE 100, the bank now expects the UK index to reach 7000 by the end of 2014, up from the previous forecast of 6900 and breaking the previous record of 6930, set on 30 December 1999 during the dotcom boom. At the moment the index is at 6802.
Regarding 2015, Credit Suisse predicts the index will reach 7,500 by the middle of the year, before falling to 7,300 by December.
At the same time, the bank has raised its year-end forecast for the S&P 500 from 2020 to 2050 (with the index already at record highs.) Explaining the moves, its strategists said:
Equities are clearly not cheap in absolute terms, trading at or close to 15-year highs on many valuation measures, but in our opinion very few assets classes are cheap. However, equities continue to be abnormally cheap against the other major asset classes (government bonds, corporate credit and, in many instance, real estate).
As for the expected rise and subsequent fall back next year, it said:
"Equities are clearly not cheap in absolute terms, trading at or close to 15-year highs on many valuation measures, but in our opinion very few assets classes are cheap. However, equities continue to be abnormally cheap against the other major asset classes - government bonds, corporate credit and, in many instance, real estate."
As for the expected rise and subsequent fall back next year, it said:
"There are two reasons why we see a correction in the second half 2015. First - wage growth is troughing and thus we think that profit margins will be peaking around the end of 2015. Second - the first US Federal Reserve rate rise: our view is that rates will probably rise in the US in the second quarter of 2015, we are a little more pessimistic than our economists. Not only are we optimistic on the US GDP growth – as very many indicators are consistent with the US growth of 3% but also most measures of core inflation in the US are starting to turn up."
