InvestmentsMar 18 2013

Bearish, bullish or neutral: DFM predictions

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Investment Adviser discretionary management correspondent Matthew Jeynes asks the judges of the Investment Adviser 100 Club awards for their predictions for the next three months and the long term.

Lee Robertson - Investment Quorum

Three-month outlook: Bearish

-There are still issues around southern Europe and really conflicting messages from the UK in terms of data, especially around the prospects of a triple-dip recession. Hedge funds and algorithm-based investors might take some profits in the short term based on these factors, which may impact on the market.

Long-term outlook: Bullish

-Momentum is back behind equities. Everyone has woken up to the fact that there is little value in bonds. Investors should be ready for a bit of shock, but long term, we are pretty bullish on markets, and equities in particular.

-Everyone has been looking for income and that has made high yield pricey and even some of those high-yield bonds are not the quality that they should be. Investors should broaden their diversification as there isn’t one particular area that is that attractive – it’s a reversion back to why you used to invest in fixed income in the first place, as a diversifier from equities.

-Fixed income has been completely skewed by quantitative easing, performing as it should not have performed, and I think we will have some short-term shocks within the equity market.

Edward Allen - Thurleigh Investment Managers

Three-month outlook: Neutral

- I think the next three months could be difficult to call for equity markets – we have had information from some researchers who are very bullish on the short-term outlook and others who are very cautious. Are we in the midst of a full-on asset rotation from equities to bonds or are we set for a pullback? It is very uncertain.

- Tactically we have been buying back into Europe – the news from the continent will continue to be dire, but it has been lagging the US and emerging market and is still the cheapest market.

Long-term outlook: Bullish

- We are very positive, so much so that if there is a pullback in markets then that could be an interesting buying point.

- Our long-term view is that we want to stick to a GDP-weighted portfolio, which is obviously a moving feast, as you will have much more in China and India within a few years’ time but we are happy with that, though we play it somewhat through developed market multinationals that have plenty of exposure to emerging markets.

Richard Leigh - London & Capital

Three-month outlook: Neutral

- The past three months have been about re-pricing risk from 2012 and they have now receded. The next three months are a question of how long that risk re-pricing can keep going and how long the rally can keep going.

- In the next three months other funds will spur risk assets further, there will be some support, especially from the policy backdrop, and that means a sell-off is unlikely.

- In equities we favour companies with low leverage, resilient earnings, the conventional defensive stocks, especially those with an eye to Asia.

Long-term outlook: Bearish

- In the long term, which is about 18 months in our thinking, we will remain in a very below trend growth world as the deleveraging cycle continues and that will be a drag on activity.

- I don’t see where growth is going to come from. This has implications for assets in that you do not want to be strategically long on sensitive assets, you want to be in quality income-related assets that are more insulated from market shocks, though there are less likely to be any huge systemic risks than in the past few years.

Thomas Becket - Psigma Investment Management

Three-month outlook: Neutral

- In the short term, I expect more volatility, though any market correction will be relatively shallow. We continue to feel that markets are consolidating, but do not see an immediate threat of a strong sell-off (greater than 5 per cent). This is making “trading” harder in the short term as neither the earnings season nor the economic data was positive enough to drive the markets higher, or down for us to “re-load risk”.

- We are running with our highest ever proportion in global equities over UK, although our start of year “cautious optimism” still dominates our thinking and investment strategy.

Long-term outlook: Bullish

- We do not expect politics to ruin what should be a positive year for equity markets, but they certainly have the ability to create another surge of volatility and sleepless nights.

- Japan has shown that politics can add to the opportunities that we can exploit in global markets, but sadly it will also add to the volatility. Markets should continue to make headway in 2013, as long as there is not a huge political mistake. Through the year we hope to receive confirmation of an economic recovery and inflation-fearing investors will continue to rotate away from fixed interest investments into equities.

Mark Robinson - Berry Asset Management

Three-month outlook: Bullish

- We have had maximum equity exposure across all our strategies because we have seen the three main risks moderating; the eurozone crisis, the hard-landing risk in China, which we always believed they would avoid, and the US political infighting that led to the credit rating downgrade.

- In the short term we have turned the gas up slightly away from defensive income assets to more growth orientated funds, though it is a gradual move. We have also been moving some of our UK equity exposure into more international focused funds, especially European funds.

Long-term outlook: Neutral

- In the long term I’m very positive for the opportunities in the markets, but I expect there will be a fair bit of turbulence along the way. Within fixed income, we are holding index-linked gilts as we believe there will be further quantitative easing from the Bank of England that will help the asset class, and most of our fixed income exposure is through unconstrained strategic bond managers.

- We continue to believe that absolute return – like vehicles, will still grind out 4 or 5 per cent this year and we will still hold gold both as an insurance and because central banks are buying up gold.