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According to research by the Association of Investment Trust Companies and IFA Promotion, some 50 per cent of IFAs expect the FTSE 100 Index to end 2005 between 5,000 and 5,500.
Over the longer term, the majority of IFAs are optimistic, predicting that investors should expect stock market returns of 7 per cent each year for the next 10 years, the research findings report.
Bond markets
In terms of bonds, corporate bonds are expected to perform well in 2005, with the global economic backdrop of low growth and low inflation expected to support bond markets. In government bond markets, UK and eurozone bonds are believed to offer better value than US bonds, with bond yields looking likely to rise.
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Property market
House prices are predicted to show moderate increases as the recent interest rate rises dampen consumer demand for new mortgage borrowing. Higher council tax, transport costs and utility bills may also weigh on consumers.
Taxing times
In terms of tax legislation, accountants predict that the Chancellor will need to revise his borrowing requirements, with the Chancellor being over-optimistic on UK growth and tax revenues. The Chancellor could freeze the current thresholds at which the different rates of tax become effective.
Capital gains
Where accountants do expect some action is on capital gains tax
(CGT) simplification. CGT taper relief is ripe for refining to smooth out some of the anomalies and to give better taper for non-business assets.
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Optimism
For the first time in recent memory, there seems to be real grounds for optimism this year.
At the end of 2000, we were in the grip of a developing bear market, it was clear that the US was slowing sharply and fears of recession were mounting. In 2001 financial markets and institutions reeled from the shock of the September 11 attacks.
Later still, the war in Iraq weighed on financial markets and took its toll of confidence and economic activity.
Financial markets have stabilised and growth forecasts are being revised up.
If you would like to discuss or review your personal or business finances to ensure that you are on the right track for 2005, please e-mail or contact us to arrange a meeting.
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