F&C Investment Outlook- 4th Quarter

Despite a a volatile third quarter, F&C remains positive on equities and belives markets will continue to be driven by a combination of an easing in monetary policy, corporate earnings and share-buybacks.

F&C remain underweight in fixed income.

F&C have increased their weighting in emerging market equities where they see strong prospects over the medium term as local economies continue to grow.

Resilient economic data from Europe should support earnings growth and F&C have increased their overweight position in equities in the region.

The UK economy remains sensitive to high short term interest rates and F&C are therefore neutral UK equities.

F&C believe housing market problems will continue to spill over to the US economy into 2008, however, constructive monetary policy should support equity markets and high cash balances should provide opportunities for share-buybacks and further corporate activity.

Although F&C remain underweight in fixed income, they believe UK corporate bond investors will start to find opportunities to acquire well-priced new issues in coming months and F&C will look to add selectively to their portfolios.