High-profile bears like Crispin Odey and George Soros continue to make headlines – and rightly so – with their warnings of global instability, but that doesn’t necessarily mean the majority are getting carried away.
This market cycle may well go down in history as the age of the “cautiously optimistic” a cliché which inherently means very little when those who have stuck with equities should have performed very well indeed.
“It is fashionable to be bearish, and no one is going to get sacked for saying ‘I think there are a lot of problems in the world, I’m going to be cautious’,” says Gary Potter, co-head of the F&C multi-manager team.
“But actually, if interest rates do go up a little bit, you suddenly might get a transition back into equities – the herd like mentality of people buying defensive assets is going to flip and that could be one of the biggest single opportunities we’ve seen.”
He adds: “I can see an environment by the end of the year when we are talking about the possibility of some inflation, bond markets reacting, and equities doing well again. I could see this happening, for no other reason than mean reversion, and therefore you could get quite a buoyant period for markets against the doomsters that are out there who I think are unhelpful.”
Potter warns to “never underestimate the US” and it is in the world’s largest market where Ronald Temple, Lazard’s head of US equities, believes sentiment remains too pessimistic.
