“The areas that we like and have been buying equities are Europe, the US, the UK and Japan,” he expanded.
“There is too much attention being given to the US manufacturers index – the non-manufacturing index is strong and the housing market is accelerating, and interest rate rises will be delayed, which is good for markets.
“Europe’s real economy is fine, while earnings have beaten expectations and could have a huge amount of upside. Europe is in a real sweet spot of the cycle – there is plenty of slack, unemployment is falling but still high, output can expand without raising wage inflation and interest rates are low. We could see 20% earnings growth in the next few years – the shake-out has presented a buying opportunity, and Europe is the most attractive market.”
But while Bell is bullish on the eurozone, Gray is taking a more reserved stance, choosing to hold high levels of cash until the global equities storm has fully blown over.
“We are very defensively positioned, which has been a good place to be in the last couple of weeks,” he said, referring to the 26.49% cash weighting in the Coram Global Opportunities Fund.
“When major markets are moving this fast and spreads are widening, the best bet is to sit back and watch – we do not want to rush back in just because there have been 2-3% rallies here and there. It is unlikely that anyone is selling anything that you want to buy at the moment, and managers need to sit back and wait for a little.”
Contrary to consensus, Gray is particularly bearish on the eurozone outlook, with the market not even figuring in his 38.58% equities allocation.
“We think that Europe is deflationary,” he explained. “There is not enough growth and in the last couple of quarters we have had a one-off adjustment to the very poor years that Europe has had in the last few years. Growth will slow next year, possibly into recession.”
