Ignis 2010 Outlook Bulletin

Please see below and attached summary selection of Ignis Asset Management's outlooks for 2010.

European equities Barry Norris, founding partner of Argonaut Capital: "Argonaut expects a strong start to 2010 as investors continue to underestimate the stimulus to economic growth caused by record low interest rates, tightening credit spreads and inventory rebuild.

Despite the rise in markets since March, there is still an abundance of stocks with further recovery potential.

A strong rebound in profit margins, and therefore earnings, is likely and should continue to drive the market higher.

Within Europe, Argonaut believes it is now time to be more positive on UK domestic equities.

Over the last two years the pound has fallen around 30% against the euro, allowing the economy to recover faster and means sterling assets are now very cheap for euro-based investors.

Global emerging markets Bryan Collings, managing partner of HEXAM Capital: "Caution and swiftness will be the watchwords in 2010, not courage.

The easy gains in the wider equity markets have been made in 2009 after the volatility of late 2008.

Looking ahead, stock selection will be vital as the rally broadens and the correlation between stocks becomes much lower.

While equity markets are forward-looking and typically peak ahead of earnings, extreme liquidity swings can result in a significant lag between the market rally and the earnings 'catch up'.

A pullback in the wider markets is warranted and probable in 2010 with a re-rating of debt and equity instruments across all asset classes as investors focus on the state of the real economy.

This is likely to be temporary and, based on earnings growth and a re-rating of valuations; HEXAM expects emerging markets to end 2010 higher than current levels.

UK Commercial Property Gary Hutcheson, Head of Property at Ignis Asset Management: "The Ignis property team is cautiously optimistic about the next 12 months.

While some sectors are currently experiencing a marked correction, we estimate the market to deliver a very respectable return of 8-10% over 2010.

The current economic backdrop gives some cause for concern.

While the UK is moving out of recession, the next few years are likely to be characterised by below-trend gross domestic product (GDP) growth.

With a strong correlation between GDP growth and rental growth in the property market, we can expect more of the same for the next two or three years.

Property is now being recognised for what it should be doing: offering an attractive income yield and some prospect of capital appreciation in the medium term.

Corporate bonds, Chris Bowie, manager of the Ignis Corporate Bond Fund: "A central theme is that risk assets will have a tough time through much of 2010 as a result of an unwinding of the liquidity-driven squeeze.

Tough also because too much good news has already been priced into the outlook for corporate earnings and that has affected equity valuations specifically.

All this suggests at first sight that a healthy yield of 6.5% for sterling investment grade would translate into a total return of that same figure.

Factoring in a half per cent rise in government yields denting total returns for corporates, but with modest spread contraction offsetting that, corporate bonds should return between 6% and 8% in 2010.

This is likely to comfortably beat cash and probably equities in a very, very uncertain environment.

Global economic outlook Stuart Thomson, chief economist at Ignis Asset Management: "Global stimulus has been unprecedented over the past year and central banks have reiterated their commitment to maintaining this stimulus.

Given the choice between igniting another asset price bubble or provoking a mild recession, it is likely central banks will choose the latter.

The UK economy is expected to belatedly exit recession in the fourth quarter and experience strong growth in the first quarter.

The US economy is expected to accelerate over the next six months as companies build inventories and increase investment.

Employment growth during the first half of the year will challenge the Fed to begin tightening policy, leading to recession in 2011.

This pattern is remarkably similar to Japan's experience in the nineties and implies a www-shaped outlook for the next decade.

US equities Terry Ewing, manager of the Ignis American Growth Fund: "The key questions for 2010 are: when does the Federal Reserve raise interest rates, and what impact will it have? The reality is that firm action is unlikely to be taken before the second half of the year.

Ben Bernanke, the Fed's chairman, will be loath to raise rates until unemployment has peaked, probably in Q1, to avoid choking off a recovery.

Thereafter it is likely he will act swiftly - our expectation is he will tighten within six months - which means rates could rise in early Q3.

Nevertheless, markets have risen in a straight line and a correction is overdue.

Companies we like include Apple, which should benefit when the expiry of its exclusive mobile phone contracts triggers an explosion in demand for iphones, and Pfizer, which was left behind in the rally but boasts a strong product pipeline and a healthy free cash flow yield.

Ford Motors, perhaps surprisingly given the problems facing the auto sector, is another favourite, and is well positioned to gain market share.

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