Looking ahead, income funds will comfortably be the best UK equity asset class according to Bil...
Looking ahead, income funds will comfortably be the best UK equity asset class according to Bill Mott, Fund Manager of the Credit Suisse Income Fund and Credit Suisse Monthly Income Fund.
Mott insists choice fund managers should be able to deliver returns higher than the Income sector in general and attractive relative to the stockmarket. Subsequently, this should also be attractive in absolute terms against the returns available on cash and bonds.
"I believe that the UK economy will continue to grow modestly in an unbalanced fashion and that as a consequence, growth stocks remain over valued. Those companies which have high visibility, economically insensitive earnings and modest but predictable growth will be revalued upwards in this environment," said Mott.
In line with this thinking, Mott remains overweight in areas such as food manufacturing, building and construction, food retail and leisure and remains dramatically underweight in telecoms and technology.
"My best guess, is that overall market levels are not going to change much in the foreseeable future and that the FTSE 100 is likely to remain in its current narrow trading range," added Mott.
Mott argues the shape of this global slowdown has been different from past economic slowdowns even without the distortion of the economic landscape following the events of September 11. This time, says Mott, the slowdown was caused by over-expansion in the corporate sector, particularly in technology, telecoms and media and it was this bursting of the asset bubble that created the slowdown.
"As the UK economy is very unbalanced, having aggressively cut interest rates, it is difficult to believe that consumers can accelerate spending from here. Equally, there appears to be no signs that the areas of the economy where there is over-capacity (those exposed to world trade) are going to be strong enough to build new momentum for the economy and corporate earnings," said Mott.
"In simple terms, it is my view that the stockmarket cycle has been sliced through the middle, which means that upside to the overall market indices is relatively limited. Equally, if 11 September didn't get the market permanently lower, it is difficult to foresee anything that will," added Mott.
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