Stock market prospects are looking up - the majority of investors expect the rally will continue and predict the FTSE 100 will be higher in 12 months time.
Confidence among investors has risen for the third consecutive month, pushing the Investor Confidence Index (ICI) to an nine year high. Confidence rose in October to 124, from 119 in September. Home-grown prospects in particular have improved, with 82% of investors predicting the blue-chip index will be higher than its current level of 6,660 by October 2013.
Adrian Lowcock, from Hargreaves Lansdown, who compiles the ICI said investor confidence has run in tandem with the FTSE 100 rise.
“Confidence amongst investors has recovered following a dip in August and is now at a 9 year peak," he said. "At the same time the FTSE 100 has been trading close to its all-time high, reached on 31st December 1999."
Two series of positive economic growth figures in the UK have helped lift consumers' outlook, with both the Bank of England and the International Monetary Fund upgrading the growth forecast for the UK.
"Investors continue to move towards UK equities amid strong equity market gains and low interest rates," said Chris Ralph, chief investment officer at St James’s Place Wealth Management.
"Latest figures from the Pridham Report, the fund sale monitor, show that equity funds’ net sales have exceeded £8 billion over the first nine months of 2013, which is on track to rival the £14.5 billion reached in the technology boom of 2000."
Emerging markets bounced back from lows over the summer following the news that the Fed will not taper its quantitative easing programme until next year - but the region is still facing uncertainty.
The ICI also revealed that despite the S&P 500 continually breaking its all-time high record, investors are dubious as to whether the rally is sustainable.
They are not alone in their concerns. Patrick Moonen, senior equity strategist at ING Investment Management International said that equity valuations were at their highest level since 2010, and are up around 45% since the bottom of the current market cycle.
"Price earnings ratios in both the US and Europe have increased substantially over the past two years, and are now close to or above their long term average," he said.
In order to have reaped the full benefit of the recent rally investors should have ideally been invested a year ago - but Moonen says that relative to corporate bond yields, equities are still attractively valued.
"We are probably close to the top of the current valuation cycle, but we don’t expect a big decline in valuation metrics. Global monetary policy remains easy and risk-appetite supports flows towards the equity market," he said.
The ICI has been running since May 1995 and reached a peak of 127 in July 1999 and a low of 61 in May 2012.
