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Defensive moves

Large-cap growth shares will provide the best returns in the next 12 months, equities will outperform bonds, cash and commercial property and the FTSE 100 will end the year above 6,000. This is the consensus of the Adviser Fund Index panellists, according to the first AFI mid-season questionnaire.

The vast majority of panellists expect the three AFIs to increase from their current values by the end of 2006. The average predicted end-of-year value for the Aggressive AFI is 141.1, up by 1.7 per cent from its August 17 level. Corresponding predictions for the Balanced and Cautious indices are 136.7 and 128.7 respectively, equating to a rise just shy of 3 per cent for both indices.

Ben Willis, head of research at Whitechurch Securities, says: “Given levels of risk aversion, the more defensive and bigger companies should perform well. Utilities, tobaccos and banks should do better while autos and other cyclical sectors may not perform.”

A small minority of respondents were not so upbeat about prospects for equities, with one panellist predicting all three indices to end the year with a value of 124.

The panellists are generally confident about the prospects for Japanese equities, with 43 per cent of respondents predicting that Japan shares will outperform all other global regions over one and three years.

Japan’s economy is expected to grow more strongly than the other major developed countries, with half the panellists expecting GDP growth to be greatest in Japan over the next 12 months.

The AFI mid-season questionnaire was sent to all 18 panellists on July 28, 2006 and is broadly split into two sections – views on financial markets and AFI portfolio recommendations. The results are based on responses from 14 panellists. These are are Allenbridge, AWD Chase de Vere, Bates Investment Services, Bestinvest, Charles Stanley, Chelsea Financial Services, Christows, City Asset Management, Dennehy Weller, Gerrard Financial Services, Killik, Origen, Thinc Destini and Whitechurch Securities.

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