The Bank of England is more likely to reduce interest rates than increase them, according to veteran investor Robin Geffen.
Mr Geffen, who founded Neptune Investment Management in May 2002 and is manager of the £208m Neptune Income fund, said anyone who had positioned their portfolio for a strong UK economy was ‘wrong’.
His comments stand in stark contrast to what many experts are predicting, and come as three members of the Bank of England Monetary Policy Committee have revealed they are likely to vote in favour of raising the base rate of interest from its record low of 0.25 per cent over the coming months.
Last month the Bank’s chief economist, Andy Haldane, surprised markets when he revealed that he had considered voting to raise rates in June. He said he would hold off until later in the year but that a ‘tightening is likely to be needed well ahead of current market expectations’.
But Mr Geffen said the ‘UK economy will slow sharply’ and he is avoiding domestic stocks including utilities and housebuilders, which could be vulnerable to a dip in the market.
He said rising inflation – currently 2.9 per cent – would squeeze consumers, who would be further hit by low wage growth, while the outlook for the property sector also looked uncertain.
Mr Geffen is instead backing companies with international earnings and has recently added IT business Sage Group and materials firm Croda International to his portfolio of just 33 stocks.
Utilising his ability to invest part of the portfolio overseas, some six of the fund’s holdings are US stocks, including financial firms JPMorgan and Wells Fargo, which could benefit from cuts to corporation tax and reduced regulation in the sector.
While he is avoiding UK banks, the fund also invests in HSBC, which gets 41 per cent of its earnings from Asia.
Mr Geffen said: ‘There is a lot of noise out there and it is important for us to stand firm and not get blown around the wind.’
Gary Millward, financial consultant at Alan Steel Asset Management, said markets definitely seem to be pricing in an interest rate rise.
"Usually I would take my lead from what markets are driving towards.
"But for the first time in a long time I would be surprised if what markets are suggesting actually happened. To raise interest rates now would be bold, considering the uncertainty around Brexit."