A second round of quantitative easing (QE2) in America is a “given”, according to George Luckraft, a UK equity income manager at Axa Framlington.
Luckraft was speaking ahead of the Federal Reserve’s decision tomorrow. He says if the Fed does not announce the stimulus tomorrow, the market will “react very badly”.
However in Britain he does not anticipate the Bank of England announcing this week that it will embark on the same exercise as the Fed.
Luckraft says the stronger than expected GDP and Purchasing Manager Index (PMI) data announced last week and this week lessens the pressure on the Bank to act this month. But he adds QE2 remains in the background if the Bank needs to support the economy further down the line.
In a discussion of the British stock market after BP released its annual results, Luckraft expects the oil giant to return to paying dividends to shareholders by February to March next year. (article continues below)
While admitting he should have sold out of the stock on day one after the Gulf of Mexico explosion, he still takes the view that that when the share price hit just under 300p, the stockmarket was discounting the worst case scenario.
“The eventual environmental damage won’t be as bad as the worst-case scenarios predicted”
“The eventual environmental damage won’t be as bad as the worst-case scenarios predicted,” says Luckraft. “Much of it was a politically inspired programme by president Obama.”
Luckraft manages three Axa Framlington funds, Equity Income, Managed Income and Monthly Income. According to Morningstar, over three years to October 25, Equity Income and Monthly Income sit in the fourth quartile of the IMA UK Equity Income sector, having seen falls of 24.3% and 27.1% respectively.
However 2010 has been a better year for the manager. Since the start of the year to the end of September, Equity Income has returned 8.1% and Monthly Income is up 8.6%, versus the FTSE All-Share which has risen 6.7%.
Managed Income, a more fixed interest orientated mandate, meanwhile currently sits top of the £ Strategic Bond sector over one year to October 25, having returned 23.2%, compared with the sector average return of 12%.