Investors expect FTSE to rise more than 5% in 2013
With the latest ONS figures showing the UK economy shrank 0.3% during Q4 2012, the latest Halifax Share Dealing Market Tracker reports investors are split 50:50 on whether the economy will grow by more than 1% in 2013.
Nevertheless, nearly two-thirds of investors (63.9%) anticipate the benchmark FTSE 100 Index will defy the expected 'bumpy economy' to end the year more than 5% higher, and 59.1% of investors anticipate the UK will be able to hang onto its AAA rating in 2013.
Damian Stansfield, Halifax Share Dealing, comments: "The strong rally in the FTSE at the beginning of the year has been driven primarily by improved investor sentiment as a result of the latest euro zone measures to bring stability to government debt markets.
"Investors are confident international markets will continue to offer opportunities for direct investment, with three quarters of investors (74.5%) now expecting the EU will remain intact, with no countries forced to drop out in 2013. Domestically, the majority (78.8%) of investors expect the Bank of England Base Rate will remain at its historic low of 0.5% this year, and as such there is increased likelihood we will see more savers looking to achieve higher returns through investment in the stock market."
Investors keep the faith with energy & mining
Investors have not been deterred by ONS figures indicating the fall in economic growth last quarter was due in part to a significant drop in mining and quarrying output, and in January it became the most widely held investment, slightly ahead of financial services.
The biggest faller in the last month was general industries, such as aerospace, defence, electronics and engineering, with just 34.8% of investors these holding stocks in January compared to 43.1% in December - a fall of 19.3%.
Top five holdings in January 2013
Energy & mining eg: gas & oil 66.4 %
Financial services eg banks, insurance, property services, investment companies 65.8 %
Consumer & retail products: beverages, health, tobacco, pharmaceuticals 45.8 %
Consumer services: retailers, leisure, entertainment, media, transport 41.2 %
Computers, information technology & internet eg: computer hardware, software, telecommunications 35.8 %
Looking ahead to which sectors investors are looking at over the next six months and energy & mining remains the most popular, with 55.5% planning to make investments here, ahead of financial services (49.1%). Planned disruption to North Sea oil and gas fields in the last quarter was cited as a reason for the dip in output, suggesting investors believe there are now gains to be made.
The latest data from the British Retail Consortium reported a stronger than expected Christmas period, with post-Christmas retail sales values up 1.9% on a like-for-like basis (and up 3% on a total sales basis) from January 2012. As such investor confidence in the consumer & retail products sector is returning and is expected to see the biggest increase in investment in the next half year, with 35.8% of investors looking to invest here during the next six months (up 17% on December).
Damian Stansfield added: "Generally speaking, more than three quarters of investors (75.5%) have seen an increase in the value of their share portfolio over the last six months, and this percentage has been increasing over the last few months.
"This recent surge has had an impact on investors' outlook the coming months, with 68.8% now expecting the FTSE 100 to end the year higher than it began compared to 39.2% in December, and nearly two thirds predicting it will be up by more than 5% by the end of the year."