Morgan Stanley has raised its year-end target for the FTSE 100 to 5800 from its current 5000 mark.
Despite market volatility the investment bank has decided that it is a good time for investors to buy shares and has reflected this in their year end predictions.
Morgan Stanley’s strategist Graham Secker said the new target for December 2010 reflects a view the economic recovery will continue which limits the downside risk too.
He has stated four reasons why investors should buy the FTSE 100 today saying global economic growth is recovering, especially in Asia, the emerging markets and the US; Recent events are likely to delay any efforts to reduce monetary stimulus/hike base rates; The financial system is more robust now given banks’ balance sheets are stronger; The oil price is below $70 today versus $130 two years ago.
“On our assumption that the global economy isn’t going to double dip and that the market isn’t therefore heading back into a 2008/09 bear market we think that maximum downside from here for the FTSE100 is 4400-4500,' he said, speaking to The Guardian.
“It is tempting to view current events through the lens of 2008 given that it originated in concerns over excess debt levels and a weak banking system in the euro-zone.”
He went on to say that the prognosis for stocks over the next year looks good and they have based their decision to raise the FTSE 100 level on those estimations.
“In our year ahead report we introduced a 12-month target of 5000 for the FTSE 100 with an expectation that equities would be down in the first half but up in the second. Now our original target has been reached we have decided to raise it to 5800.”
© Fair Investment Company Ltd