Rathbones’ Chillingworth predicts 7% rise of FTSE 100 by the end of 2011

Rathbones’ CIO Julian Chillingworth has forecast the FTSE 100 to hit 6,350 by the end 2011, a 6.8% increase on last week’s 5,900 mark.

Chillingworth says the index is likely to benefit from UK companies’ exposure to overseas earnings but economic growth will remain muted.

“The FTSE 100 will benefit from growth in the developing world, which is good for earnings. Overall, as long as the US Federal Reserve continues a policy of easy money you will see people continue to buy risky assets, such as equities, and the UK is expensive compared to other markets in the world,” he says.

Chillingworth is concerned the EU’s plans to create a longer-term stability pact for the peripheral sovereign debt markets, such as Greece, Ireland and Spain, will be a ‘fudge’.

“At the moment, they are arguing among themselves about how it is going to work and who is going to contribute the money because the Germans understandably are not keen to put more money into the system. But I think it is likely they will come up with ‘a fudge’ and not a real solution,” he says.

Commenting on recent rises in the price of gold, Chillingworth says there has been a lot of ‘hot money’ going into the sector, or short-term speculative investment.

“You may well see it unwind if people’s concerns about what is happening in the Middle East come to fruition. Money tends to move into gold in times of crisis,” he adds.