Hargreaves Lansdown founder Peter Hargreaves believes global equity markets are being held back by a number of irrational fears, and that when reality sets in, investors will be “cheered” as global equities hit record highs.
Mr Hargreaves has about 90 per cent of his total wealth in equities, a sum of more than £2bn. The bulk of this is accounted for by his stake in the Hargreaves Lansdown business he co-founded. Last year he teamed up with the fund manager Stephen Yiu to launch the Blue Whale Growth fund, a global equity mandate.
Mr Hargreaves invested £25m of his own money into the fund at launch. It was in a communication with investors in this fund that Mr Hargreaves outlined his view.
Mr Hargreaves said: “Stock markets feast on doom and gloom. They are more obsessed with anguish than positive economic indicators.
"However, optimistically it is often stated that ‘markets climb a wall of worry’. When things look bleak on many fronts the one thing you can be sure of is that the price of markets are reflecting the uncertainty.
"I put my money where my mouth is – in excess of 90 per cent of my wealth is invested in the stock market and I plan to add to this on an ongoing basis.”
The Blue Whale Growth fund has returned 15 per cent this year to 19 June, compared with 3 per cent for the average fund in the IA Global sector in the same time period.
As FTAdviser has previously reported, Mr Hargreaves does not see the UK’s exit from the European Union as a reason to be negative on equity markets.
He said many investors are wary of the impact of the rising oil price on equities and that this has contributed to worry, but he said the oil price will not this time, as it has done in the past, contribute to a decline in the global economy and stock markets.
A higher oil price is typically seen as negative for global growth because oil is used to transport consumer goods, so if the oil price rises, those goods become less affordable, and people buy less, this leads to a reduction in the manufacture and sale of those goods and so unemployment rises, which perpetuates a further decline in the level of demand in the economy, creating a vicious circle.
"Today, as is often the case, there are a host of causes for concern, but to the forefront is the oil price. Some pundits are unnecessarily obsessed with its fluctuations," Mr Hargreaves said.
"Oil prices have risen since last July in the region of 70 per cent which seems a staggering figure. However, to put that in context the oil price is around half the price it was just four years ago.
"The oil price is no longer the key economic factor of the past. It would be negative if it hit the dizzy heights of the $145 we experienced in 2008.
"Things are however very different than 2008. There are big new sources of power in addition to the rush for renewables. As the oil price rises shale, fracking, deep sea wells become increasingly economic and switch on their taps.
"An enormous percentage of oil is produced in totalitarian regimes. Many of those regimes depend on oil flows to placate their disaffected populaces. Those regimes are universally desperate for oil dollars at any price.”
He said this has led him to conclude that: “The markets are actually being held back by fears relating to the oil price. As those fears evaporate markets will be cheered even beyond what many consider to be a high price”
Mr Hargreaves conceded shares "seem expensive by historic standards", but warned investors against holding hoards of cash.
"The circumstances are unique. I believe holding cash with a view to invest further down the line would prove unfruitful, as opportunity after opportunity will be missed.
"Other assets are poorly positioned, or have values so far inflated above that of the stock market, There is a lot of noise that the market is expensive, yet equity prices keep going up. There wasn’t much noise in 2007 that the market was expensive, we all know what happened."
Rob Morgan, investment analyst at Charles Stanley said the Blue Whale fund has made an excellent start since launch in September 2017.
"It is some evidence of the potential of a truly unconstrained and focused approach to stock picking in adding value to investors, but it is over a very short period and, as always, past performance is not an indication of future returns.”
David.Thorpe@ft.com
