Star fund manager Neil Woodford says there are “too many challenges” for global markets that “no president” could change.
Referring to the potential political and economic disruption the Italian referendum – as well as the French and German elections – could bring to markets, Woodford says the risks in Europe are of more concern than anything Donald Trump’s election might bring.
Speaking at the AJ Bell Investival conference in London yesterday, Woodford said: “There are lots of structural challenges globally. No president can have an influence on that. The market has anticipated an inflection point in policies. I wouldn’t be as bullish as other commentators on the possible positive changes new presidents would bring, including Trump.”
Woodford cites the ageing demographic as the main cause of weak consumption growth globally.
He says: “For those who haven’t saved enough they can only keep on working. Low and slow growth is there because people spend less and save more. That’s not going to change either with Trump or without.”
The manager also says he has “no idea” where we are in the economic cycle and that GDP growth globally “will continue to be disappointing”.
He says: “We are reaching the end of the revaluation trade, we have to rely much more on companies’ growth. I’d be cautious about anyone saying the economy will accelerate. This is not happening anytime soon.
“The market has overreacted as they’ve paid too much attention to what Trump has said before he got elected rather than what actions he might actually take.
“People should be trading carefully, it is time for active managers to step up and make the right choice. There is good dividend growth in some parts of the economy but dividend cuts in others.”
Woodford confirmed his positive stance on healthcare stocks, which make up the largest part of his portfolio.
He believes the most attractive valuation opportunities are in the early stage disruptive science businesses, which are “profoundly undervalued.”
In addition, on the possibility of Trump’s plans to “repeal and replace” Obamacare, Woodford says this would be a “big mistake”.
He says: “I remain positive on healthcare. Trump has helped the sentiment in the sector but it would be a big mistake to get Obamacare away. There will be more than 25 million people affected by that. Obamacare could be unpopular but an environment without it would be worst. I don’t think Trump will get rid of it but only reform it.”
Referring to the bullish stance some managers have on financial stocks, Woodford says: “Life will remain very difficult for banks. I doubt they can sustain pressures on their capital. They remain unappealing investments.”
Geographically speaking Woodford’s most positive outlook is on the UK, in contrast to other fund managers.
“I am optimistic about the opportunities set of the UK economy. I think it will perform well in the next five years. There’s a lot to be excited about but it needs more Government help and to sort the post Brexit uncertainty.”
Speaking about the Bank of England and the actions Mark Carney has taken recently on monetary policy, he says the BoE is “a credible central bank”.
However he adds that we are unlikely to see higher rates under the Bank of England governor.
“Carney has acted appropriately after Brexit and that helped the economy but I think he has a limited hand. He’ll never raise interest rates.”