Armstrong Investment Managers’ Ana Armstrong, the co-manager of the £18m Diversified Dynamic Solution and £42m Diversified Real Return funds, has increased their weighting to equities and increased cyclicality following the actions taken by the Federal Reserve and European Central Bank in September.
Meanwhile she added into large cap technology stocks during last month’s market sell-off, with new additions including information technology companies such as Apple, Google, Arm, Intel, IBM, Cisco and Oracle. The fund manager expects new products/upgrades and a moderate pick-up in corporate IT investment next year.
In September she also added car companies BMW and Volkswagen to the portfolio.
Armstrong, who co-manages the funds with partner Patrick Armstrong, says: “We have increased the cyclicality of the funds as the cyclical stocks have been pretty much priced for recession and unless there is an easing in recession, they are standing for decent earnings. Global nominal growth in 2012 will be around 6 per cent.”
She adds: “Now while we think cyclical stocks are going to perform, the performance will be supported by the central banks, by the Fed and the ECB.
“So, while the ECB are looking to keep the peripheral bond yields down to make the loans affordable for the periphery, the Fed is really looking to reduce employment and if you look at the global growth it is not bad at all, it is currently around 6 per cent.”
Despite stagnation in the West, she says the emerging consumer will continue to grow. This plays into the hands of BMW and Volkswagen, which she says are benefitting from significant exposure to emerging market structural gowth as well as being well positioned in Europe, China and Brazil.
She adds: “There are low car penetration rates in China which drive further growth, especially as Chinese markets really like German cars and they are in a favourable position compared to the Chinese competitors.”
Meanwhile, Armstrong says investors are fearful and are missing key elements which support their decision to add large-cap technology stocks.
She says investors should not underestimate the impact and importance that central bank actions will have on markets.