PBR pessimism could lift the stockmarket in 2010

Fidelity International head of UK retail sales Peter Hicks says the Government’s economic pessimism in the pre-Budget report could boost the stockmarket in 2010.

Chancellor Alistair Darling said the UK economy will have contracted by 4.75 per cent by the end of the year. He conc- eded that the economy will have shrunk by more than 1 per cent over the 3.5 per cent he originally predicted in April’s Budget. He said GDP would resume growth in 2010, increasing by between 1 and 1.5 per cent over the year and continue at 3.5 per cent in 2011 and 2012. GDP is currently at -0.3 per cent.

Hicks says: “As we come out of recession and the economy grows by even 1 per cent, the level of debt relative to the size of the economy will come down.

“People are underestimating economic recovery and finances are probably in a better shape than a lot think, which will be good for the stockmarket bec-ause one of the reasons it did so well from March is that not many trusted the rally.

“You would not be surprised if the Chancellor has been deliberately a bit pessimistic and figures in April are better. It could be good for the stockmarket if expectations are dampened.”