Research from New Star has claimed that the FTSE 100 is 'following historical precedent and will continue to recover, perhaps even hitting 6900 by 2008'.
The company believe that although the FTSE 100 fell during May, the market is now recovering in line with the exit from 'the three great bear markets of the last century'.
New Star have been examining the three bear markets of the last century and correlating the data with the behaviour of the FTSE 100 during the most recent bear market which ran from 2000 to 2003. From March 2003 onwards, the stock market recovery closely mirrored the average recovery from the 20th century bear markets.
The company have stated that ' if the markets continue to follow the 'three bears' trend, equities will keep on rising until mid-2007, and will then grow more modestly until the end of 2008'.
Our view
The whole of the western economy will collapse if equities do not perform in the longer term. For the sake of all stockmarket investors, let us hope New Star are correct.