Buxton says FTSE 100 won’t break out of the 6,000 level

Schroders head of UK equities Richard Buxton says it is unlikely that the FTSE 100 will break meaningfully above 6,000 over the next 12 to 18 months.

In January, Buxton, who manages the £2.5bn Schroder UK alpha plus fund, predicted that the FTSE 100 would rise by 25 per cent in 2011. The FTSE averaged 5,975 in January.

At the Cofunds investment forum, Buxton said: “It seems the floor right now is 5,000 and I am highly impressed that it has been resilient at that level but the prospect of breaking meaningfully above 6,000 any time soon seems rather remote.” He said the market is pricing in the collapse of companies. He said: “A lot of cyclical stocks have halved and companies have halved earnings expectations for 2012. Companies are saying to us that it is still tough out there but it is not that bad, so it is not as bad as some share prices seem to suggest at valuations of nine times earnings.”

Buxton is sticking with his conviction in UK banks, as he says he expects them to be trading at one and a half times book value, up from the current trading value of half book value.