InvestmentsApr 4 2018

Woodford says UK a 'bargain' as global economy falters

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Woodford says UK a 'bargain' as global economy falters

Neil Woodford has been buying more UK-focused shares as the world economy falters.

He said the sharp falls in markets since the start of February was likely the result of tighter monetary conditions in the global economy as interest rates rise, rather than pressure on individual technology shares.

Mr Woodford said economic data from the US and the Eurozone over the past month had been poor, while in the UK growth forecasts were being upgraded.

He said: "Interestingly, the global economic picture has started to look a little less rosy, with data disappointments emanating from the US and Europe, alongside growing concerns about the impact of tighter US monetary policy on parts of the world such as Asia.

"In fact, there is an increasing possibility the UK economy could be the fastest growing of all OECD (Organisation for Economic Cooperation and Development) nations by the end of 2018."

He said wages in the UK were growing again while unemployment remained low and inflation was falling, which would have "positive ramifications" for the British economy.

Mr Woodford said many UK-listed companies, including Fidessa and Hammerson, had attracted bids from overseas buyers keen to snap up "bargains".

He said this was evidence the world was waking up to the cheap nature of UK-listed companies. He has continued to buy the shares of UK domestically-focused companies over the past month.

Mr Woodford's positivity comes as the assets in Woodford Equity Income fund fell to £6.5bn, a drop of about £3.5bn in a year. The fund is the worst performing in the IA UK Equity Income sector over 6 months, one year and three years to 3 March.

David Scott, an adviser at Andrews Gwynne in Leeds, said: "From my observations a pattern appears to have developed in the past few months in terms of the ongoing decline in stocks.

"Every time the Fed cuts the balance sheet or raises interest rates stocks plunge by around 1,200-1,500 points within a few days. Then, there is a smaller rebound about a week which then peters out going into the next month as stocks return to a slower grinding downward trajectory. Then the cycle starts all over again.

"New monthly highs are being replaced with new monthly lows as stocks are being steam valved down with each fresh balance sheet cut and I suspect that as the balance sheet cuts get bigger then it will become ever more difficult for stock markets to produce meaningful bounces."

david.thorpe@ft.com