It’s no time for risk, warns Miton’s Gray

Elsewhere, the manager was critical of the suggestion the European Central Bank (ECB) may begin quantitative easing.

“In 2008 it was the investment banking parts of the system causing the trouble, but now central banks with their zero interest rate policies and quantitative easing are funding excess,” he said.

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“The last thing people need is the ECB flooding the world with bank notes.

“There are bubbles in markets now but just because they have moved doesn’t make it better.

“When the issue was in the banking system, central banks could mend it but this time it is different.”

Where is Martin Gray finding value?

Miton’s Martin Gray is often described as a perma-bear but the manager has found an area of the market to love.

His most recent trade was to top up his exposure to Japan through his holding in the Coupland Cardiff Japan Alpha fund. He also owns the JPMorgan Japanese Investment Trust and GLG’s Japan CoreAlpha fund, headed by Stephen Harker.

“The relative valuations [in Japan] look good,” said Mr Gray.

“From an equity market perspective it is as cheap as any time in my investment career on a price to earnings (p/e) and price to book basis.” The manager said the Topix index was trading at 12.7x p/e while the US S&P 500 index was on 17.9x.

“I think earning growth in Japan will be higher in the next couple of years,” he said.

“The Japanese market looks significantly better. Everyone is worried about the sales tax rise from 5-8 per cent but I don’t think it will be a problem.”

Mr Gray said Japan “running out of steam” this year had been part of the reason for his “struggling” performance, but he was confident the market would soon bounce back.