Investors are gaining confidence in a stock market recovery, following the decline in the market over the last four years.

Almost two thirds (64%) of people with financial investments affected by the stock market believe the market will recover its losses within the next five years, according to research for Abbey National. The research follows the recent launch of Abbey National’s new stock market-linked investment, Recovery Plan, aimed at investors who believe the stock market will recover over the next five and a half years.

A quarter (25%) think it will recover within two years whilst nearly a fifth (19%) expect it will take three years. The most confident investors are in Wales, with three quarters (75%) predicting a recovery in five years, in contrast with the least confident in the East Midlands (54%). However, 23% of people surveyed think it will take more than five years for a stock market recovery.

Right time

With the stock market reaching its lowest level for seven years in March 2003, around half the respondents (51%) think now is the right time to invest to benefit from a recovery and long term growth.

Men are more likely to agree with this than women (55% vs. 46%) as are people in Yorkshire and Humberside (59%), in contrast with the south east where only 49% of people agree it is a good time to invest.

Over half of investors (56%) also think the current market represents good value because shares are cheap or under-priced.

The younger investors, aged 16-34, are most likely to agree (61%) whereas older investors, aged over 65, are the most likely to disagree (37%). Regionally, the Welsh are most likely to agree (66%) that the market represents good value now whilst people in the East Midlands are the least likely to agree (47%) with this.

Abbey National’s ‘Recovery Plan’ operates by measuring the closing level of the FTSE 100 on the strike date (23 July 2003). This is known as the Initial Index Level. The closing level of the FTSE 100 Index is measured on 22 January 2008 and each business day until 21 January 2009, the averaging period. The average of the daily closing levels during this period becomes the Final Index Level.

Growth will be based on the difference between the Initial Index Level and Final Index Level. The final level of return will be based on the customers’ own choice of risk to their original capital. By accepting 80% of any growth, the full capital value is protected.