IFAs predict W-shaped recovery and year of stock market turmoil

A quarter of IFAs are predicting wide spread stock market fluctuations and expect a W-shaped recovery in 2010, according to recent research conducted for Prudential.

The study revealed that 25 per cent of IFAs expect wide fluctuations in stock market prices, with a further 24 per cent expecting equity prices to stagnate, hovering between 5,000 - 5,500 points throughout this year.

While the majority of IFAs seem pessimistic about strong stock market growth, around one in five (22 per cent) take a more optimistic view, believing the FTSE index of leading shares will rise to between 6,000 - 7,000 points by the end of 2010. And just 4 per cent of IFAs expect to see equity values fall in 2010.

The findings highlight ongoing caution regarding the UK's economic recovery, with official figures released in January showing 0.1 per cent GDP growth in Q4.

And IFAs questioned for Prudential expect the impact of the recession, now regarded as the worse since World War II, to continue for some time, with 71 per cent believing it will have a long term impact on how clients look to invest.

Andy Brown, Director of Investment Funds, Prudential said: "Clearly IFAs are cautious about the growth prospects for the stock market in 2010 and expect to see fluctuations in share prices for most of the year. However, it is encouraging to note that just 4 per cent anticipate stock market prices to fall and, for investors, it is worth setting this against the background of very low returns on cash based savings accounts and the speed at which cash savings are being eroded by rising inflation.

"In the current environment it is more important than ever to actively manage investments and aim for savings to be placed in better performing funds and that the balance between cash and equity based savings and bonds is weighted to suit investors' short and long term financial needs, aspirations and risk profile.

"While it is widely thought that stock markets will continue to fluctuate for the foreseeable future, there will be good opportunities and utilising a good fund manager and gaining financial advice is key if investors want to have the best chance of successfully riding a slowly rising market."

Prudential recently launched five new actively-managed risk-rated multi-asset funds designed to help advisers focus on client management through an extension of its partnership with independent investment specialist Old Broad Street Research (OBSR).

The partnership gives advisers access to the asset allocation expertise of Prudential's Portfolio Management Group (PMG), which currently manages over £100 billion of capital, and the fund selection and recommendation experience of OBSR, in one place.

The funds are actively risk managed in line with their portfolio investment objectives and may help reduce the risk of potential TCF issues through running static portfolios.

The five portfolios - Defensive; Cautious; Cautious Growth; Balanced; and Adventurous - are available on a range of Prudential personal pension products, income drawdown, onshore and offshore bonds.