Britain’s top-flight index was set to reverse recent gains to end the year lower by 7%, delivering a ‘reality-check’ for investors, strategists at HSBC said.
The harsh economic realities of Brexit would soon become apparent, taking the place of promises of further central bank stimulus, HSBC’s head of European equity strategy Robert Parkes toldBloomberg by phone.
“We’ve had the good news, but we have the bad news to come — Mr. Carney’s handing out the paracetamol before the hangover kicks in.
“Even though the FTSE has big international exposure, we still have to remember that it’s got about a third exposure to the domestic economy — not insignificant,” London-based Parkes told the newswire.
At the time of the writing, the FTSE 100 was standing approximately 7.3% up on the year.
“There is an unprecedented level of uncertainty on both of those issues. U.K. shares, including the FTSE 100, are in for a bumpy ride over the course of the next few months — in a downward direction.”
Nevertheless, all of the strategists polled by Bloomberg forecast the Footsie would perform better than European shares, which in Parkes’s case meant he expected it to fall by less.
One small silver lining was that analysts had trimmed their estimates for the rate at which FTSE 100 constituents’ earnings would drop in 2016 from 8.5% to 4.7%.
To take note of, HSBC strategists were by far the most bearish on the prospects for the Footsie from among the seven canvassed by Bloomberg, with those from Natixis, Berenberg and SocGen expecting it to rise in 2016.
Barclays, Deutsche Bank and JP Morgan on the other hand were predicting falls of up to 2%.
HSBC’s forecast for the Euro Stoxx 50 was for a 22% drop in 2016 – also the most bearish prediction among strategists.
SOURCE: Digital Look
