The market downturn of the past couple of days is most likely to be a healthy correction in a longer-term bull market, according to research conducted by Simon Ward of New Star Asset Management. The research examined the performance of the UK's FTSE 100 Index following the three great bear markets of the twentieth century (1929-1932, 1936-1940 and 1972-1974), and compared their trends to the rally following the recent bear market of 2000-2003.
Remarkably, the current recovery, from March 2003 to February 2007, mirrors closely that of the average of the recoveries following the "three bears" of the twentieth century. The chart below shows how the market has continually corrected to this average when it has risen substantially above it, as was the case in May 2006. By 20 February 2007, the FTSE 100 had climbed above the forecast once again (see chart). This suggests that the recent market falls are more likely to be a correction than the start of a longer-term bear market trend.
Since Simon has initiated his research in mid-2002, market movements have correlated closely with the path of share prices during and after the three major bear markets of the twentieth century. This research highlights historical patterns and does not necessarily constitute Simon Ward's personal forecast for the UK's FTSE 100.
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Past performance is not necessarily a guide to future performance
For further information please contact:
Mark Skinner New Star 020 7225 9245
Trina Arthur New Star 020 7225 9261
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NOTES TO EDITORS:
Past performance is not necessarily a guide to future performance. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.
IMPORTANT INFORMATION
The views and opinions expressed in this commentary are solely those of the author
at the time of writing and therefore may not be an indication of New Star's house view.
Past performance is not necessarily a guide to future performance. The value of the
investments in the fund may fall as well as rise and there is a risk of capital loss.
Investors may not get back the full amount invested. In addition, the value of
investments of the fund may increase or decrease as a result of changes in exchange
rates between currencies.
