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MARKET COMMENT
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This is a very confusing time for investors. The so-called experts talk at great lengths about double-bottoms and 'bear squeeze' induced rallies. Then there are moving-average breakout patterns and dead-cat bounces. It's enough to make any sane person tear their hair out in desperation. Over the past few months, the FTSE 100 Index has risen about 14% from its five-year low. That bounce has led some experts to predict that the falls in the stock market may now be over. They could well be right. Others have suggested that this is only a brief respite and that, once this period of remission is over, shares will continue their down trend again. They could also be right. That is it in a nutshell. The experts are about as clueless over the short-term performance of the stock market as they ever have been. While these pundits chase the market around in circles, the US central bank has been doing its bit to stimulate investment by cutting interest rates. The European central bank is widely expected to reduce rates itself the next time around. Businesses have been doing their bit as well, but being more realistic about the current economic problems. Huge asset write downs are an admission that investment mistakes have been made in the past and more realistic outlook statements encourage the thought that fewer might be made in the future. All this suggests that businesses and investors are better placed to move forward than they have been for some time. That is not to say that there won't be any more nasty surprises, but companies have demonstrated quite convincingly their resilience and resolve to withstand shock. On average, the companies that constitute the FTSE 100 Index are on a price-to-earnings valuation of 19. The average dividend yield of 3.35% is also more than the interest that can be earned from all but the most generous bank deposit accounts. With attractive yields and the potential for capital growth, shares still look cheap despite the recent rise. Who knows where the market might be headed in the immediate future, but there look like being some mighty good opportunities for investors with an eye on the long term.