Based on the economic background, the oil price scenario and the consumer prices and interest rate development, we expect a generally strong stock market performance in 2006.
About in line with consensus we expect average earnings per share growth in the US for the S&P 500 companies to be between 8-10% for 2006. For Europe we expect about 10-12% for the EUROSTOXX 50 index and also for Japan we expect earnings growth of 8-10% for the Nikkei 225. In Europe and Japan earnings growth is slightly higher than in the US due to the catch-up process in restructuring that European and Japanese companies are performing compared with US companies. The average earnings per share growth in the US is still a healthy 8-10%, due to a still comfortably growing economy, share buybacks, and the expected lower US$ and lower oil price.
The main reasons for presumably higher stock prices will be the lower oil price and the end of the tightening cycle of the Federal Reserve. These two developments combined with higher average earnings per share should lift the main stock market indices higher. We expect the European shares to outperform with an 15-20% increase for the EUROSTOXX 50 for the 15 month until December 2006. For the Japanese Nikkei 225 and the US S&P 500 indices we expect 10-15% performance each until the end of 2006.