Psigma Investment Management’s Tom Becket has adopted his most bearish position on equities in the past five years and warned it is “highly possible” there will be a 15-20 per cent market correction this year.
The chief investment officer of Psigma said that while equities appear to be the best asset to invest in within a five-year time horizon, in the next five months investors could lose money.
He said this was possible in spite of his view that the global economy will continue to recover, with improved growth from Europe and the UK adding to expansion in the US and emerging markets.
However, the equity markets have already priced in that growth, with share prices racing ahead in recent years without much earnings growth.
Mr Becket said: “We have taken back our equity overweight position to neutral and raised our cash position to overweight.
“Equity valuations have gotten ahead of themselves and sentiment is overheating.”
He pointed out that the S&P 500 index has now gone more than 400 days since a proper market correction, which is an anomaly that Mr Becket does not expect to last much longer.