Bearish outlook for bonds in 2005
New Star's Theo Zemek, Newton's Peter Hensman and Ewen Cameron-Watt from Merrill Lynch examine the state of the global market and its outlook for the year ahead. While Zemek and Cameron-Watt are bearish on bonds, Hensman is tipping the asset class over equities for the coming year.
Other points covered in this week's debate are:
• The continued weakness of the US currency and the impact this will have not only on the US domestic economy but also on the Far East. The three discuss the implications of the Chinese and Asian central banks support of the currency and whether this stance will continue into the New Year.
• What level will UK interest rates hit next year? There is talk that they will be on hold for much of the year but Zemek, Hensman and Cameron-Watt discuss the impact of the UK housing market on monetary policy.
• On the commercial side of property, demand still seems to be supportive of current prices, according to Cameron-Watt.
• Dividends will again be a focus for most equity investors in 2005, the three agree, predicting that half of returns in the UK market are likely to be derived from dividends.
• Is the oil price likely to rise again and what will be the likely impact on China? Hensman believes the oil price will rise again next year and this will squeeze profit margins including those in China.
Investment Week Conjecture will start again on 13 January, 2005, with the UK outlook for 2005. For more information go to www.conjecture.co.uk.