Year in preview

Investors can expect a mixed year for global equity markets, according to a Fidelity International forecast, which also anticipates steady interest rates and rising inflation in the New Year.

Commenting on the outlook for markets in 2008, Fidelity head of investment strategy Michael Gordon said next year could be one of the most interesting for equity markets this decade.

“At least two of the three pillars that have propped up the equity bull markets of the West since 2003 — leverage, consumer spending and corporate earnings — could be missing in 2008,” he said.

And while inflation is not currently a problem, Fidelity claims it could emerge as a real issue.

“There are already early signs that economic growth and corporate earnings are being eroded by inflation, thanks to the rampant consumption of energy and commodities in Asia,” he said.

But there are still gains to be had in equities for those willing to pay less heed to the benchmark indices, according to Fidelity, and investors should expect continued buoyancy in Asia.

“Globally, monetary conditions are likely to remain supportive. Interest rates continue to be low by historical standards and central banks are more likely to cut the cost of borrowing than raise it, particularly if economic growth does stutter. I believe shares will offer positive returns — provided that investors are choosy about stocks and are less influenced by the make-up of benchmark indices,” Gordon said.