A "discount" on Irish shares will be closed over 18 months as positive economic news slowly lifts the gloom in the equity market, according to a study released today.
In the Irish Life Investment Managers 2008 Investment Outlook, senior equity strategist, James Forbes said the recovery would not happen quickly and that the first half of this year would be difficult.
By the second half of the year, however, Mr Forbes believes that interest rates will fall in both the United States and the euro zone, although he added the housing slowdown would impact on growth and that the Irish consumer was expected to be "less resilient" this year.
According to Mr Forbes current valuations on Irish shares assume a "highly unlikely" earnings collapse this year, and he believes the longer term fundamentals are solid.
Looking overseas, Mr Forbes expects the US economy to experience a significant growth slowdown during the first six months of the year and believes that the risk of a recession has increased.
In the euro zone leading indicators such as the PMI and the German IFO survey suggest a growth slowdown in 2008, according to Mr Forbes.