According to Roger Noddings, chief investment officer of HSBC Investments, equity markets will rise in spite of “softening” economic growth.

He added that equity markets will beat bonds and cash, but added that this will not be by a “significant margin”.

His comments come after Morgan Stanley told This is Money that investors should take a “defensive” approach to equity portfolios in order to “minimise both cyclical and financial exposure”.

Mr Noddings predicted that 2008 will see at least two more interest rate cuts in the UK, while the Federal Reserve is likely to cut US rates once or twice in the new year.

Recession will be avoided in the US economy, he added, but said that growth in the country will slow.

“Robust growth” in emerging markets could salvage global economic growth, Mr Noddings added.

The chief investment officer noted that the global economy has faced “a significant test” in recent months, but that fundamentals are “generally sound” and should keep the global economy on course.

“A mixture of cheap equity valuations and dramatic policy response should allow stock markets to rally toward the end of 2008 as they look forward to steadier conditions in 2009,” Mr Noddings concluded.

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