AFTER another record week in the markets, parallells between the current boom and the situation just before the 1987 crash are being drawn. Many commentators are asking if the markets are nearing their peak and whether an imminent slowdown is all but inevitable now.
Market analysts, however, insist the answer is No. They continue to forecast further gains, particularly in the financial sector, with few indicating any clouds on the horizon.
Dr John Hogan, head of equity research at Riada, insists comparisons with the situation just ahead of the last dramatic crash in 1987 are unfounded, arguing that equity markets are better underpinned this time around and, as such, should be able to sustain continued good growth.
Most brokers forecast that the market has the potential to make further gains by year end, with most expecting the ISEQ to rise to 2,800 over the coming months.
The current rally is being driven by falling bond yields and the whole monetary convergence story in Europe. The sudden sharp appreciation of sterling over the past week has also proved an added bonus for Irish equities.
The improving fortunes of the British currency are expected to translate into higher British earnings for the many Irish companies with operations in Britain and Northern Ireland.
Bank of Ireland and Waterford Wedgwood will be among the main beneficiaries with the rapid 3 per cent appreciation in sterling translating into a healthy improvement in full year profits, if sustained.
Financial stocks, in particular, expect to see a further upside this year, with stocks such as Bank of Ireland and AIB likely to make good gains on the back of strong international bond markets.
This week saw both banks reach new all time highs, with Bank of Ireland trading up to 520p and AIB climbing to 3921/2. Both, it seems, have the potential go higher.
In general, analysts say they are not overly concerned about the equity markets as long as bond markets continue to show a strong performance. And while bond yields could tick up slightly in the short term, there is little to suggest anything of the order required to upset the equity markets, they say.
As the ISEQ index heads into uncharted territory, however, some investors expect to see a correction. But most analysts say this is not quite warranted yet.
As the strength of the Irish market can be directly attributed to solid fundamentals in the domestic economy and the additional favourable international in vestment climate, Mr Liam Igoe, of Goodbody Stockbrokers, says it is hard to see what could prompt a correction in the immediate future.
"While it's something we'll have to keep an eye on, I don't see anything like that happening in the short term," he says.
So the story from the markets is "steady as she goes". The Irish market still has some way to go this year, with financial stocks benefiting most, but keep an eye on the bond markets.
