Ralph Brook-Fox of Ignis Asset Management anticipates double digit returns from British markets by the end of 2009 as a recovery begins.
The manager of the UK Focus fund says although the early part of 2009 will probably see negative newsflow continue, he expects Britain to perform “respectably” and will rotate his portfolio into more cyclical stocks after the first quarter.
He says: “The UK stockmarket over the next three months should trough as the poor economic data continues to flood in. Earnings estimates will continue to fall, which they must do before we can be confident that expectations have fully adjusted…Given the increasingly attractive valuations, I believe double-digit returns by the end of next year are entirely achievable, especially given the increasingly poor returns available from bank deposits.”
He adds that investors will need to be brave to avoid missing out and interest rate cuts, as well as falling inflation, have led him to favour the consumer area of cyclicals. However, he says, this is more likely to be in the clothing goods sector rather than housing-related stocks.
“Rotating into more cyclical stocks is not an immediate priority, however, as we expect the newsflow in the first quarter to be poor. There is no point getting beaten up by the market when you know the punches are coming. The middle of that gloomy period, however, could be an opportune time to start looking at companies that will do well for the rest of the year,” he says.