AIB Investment Managers is upbeat about the prospects for world equity markets this year. In its latest Investment Review, AIBIM says firmer economic growth combined with the positive effects of new technology should restrain the extent to which inflation will rise and will help to keep a lid on interest rates.

"This environment is likely to be more helpful to equity markets than to bond markets," according to AIBIM. It says that after the recent rallies, price/earnings valuations for many of the world's leading stock markets are quite demanding, particularly in the technology sector.

Of the major equity markets, AIBIM says the prospects are more favourable in Europe where valuations are not overly demanding, corporate earnings are likely to grow strongly and interest rates should continue to be low in absolute terms.

The main risk for equity markets is that continuing strong economic growth in the US leads to higher than expected increases in US interest rates.