Stock markets will not recover until all of the excesses of the late 1990s have been worked through ...
Stock markets will not recover until all of the excesses of the late 1990s have been worked through the system and that could take some time yet, said Richard Buxton, head of the UK Specialist Team at Schroders.
'It takes time to unwind the excess, repair the damage, change the mindset of companies and investors and hence to create opportunities. Though it is possible to create a shorter downturn, you can't foreshorten the time it will take to repair the damage done,' he said.
He regards the weakness of stock markets over the past six to eight weeks as part of the rebuilding process and said the disillusionment with equities following the recent market falls is a sign that things are stabilising, though he expects more profit warnings, and recapitalisation.
He also advises investors to stick to perceived cheap, trusted companies untainted by the past.
'There is value beginning to appear. The UK stock market is now back to its long-term trend level. US investors are also starting to buy at what they see as bargain base levels and if share prices do not improve overseas takeover activity will pick up.'
Buxton sees some good short-terms opportunities in financials, and in consumer stocks where people are worried that the consumer is heading for the bunker in the belief that UK interest rates will rise by less and later than being forecast at present.
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