“It appears that investors everywhere are dramatically rebasing expectations. The principal trigger for this market rout has been the combination of weak macro data from China along with the precipitous fall in Chinese equity prices, which has confounded the authorities’ increasingly clumsy and apparently desperate attempts to stabilise the market,” he said in a blog post on his firm’s website.
And, while he said recent events were already embedded in the expectations used to decide which stocks in which to invest, he added: “We remain cautious of the global growth outlook and, on balance, believe that interest rate increases, both in the US and here in the UK, are further off than consensus has hitherto believed,” Woodford said.
Woodford’s primary concerns remain weak global growth and productivity, deflation and excessive debt, he said, fears of which he has spoken before.
With regards the UK specifically, where he acknowledges that growth has been comparatively strong, he reiterated his concerns about the disproportionate role consumer spending has played in the recovery.
At the corporate level, Woodford said, the firm continues to be wary of the gap between QE-inflated equity valuations and economic fundamentals, which he said was especially relevant given the weak earnings backdrop.
“We will continue to focus on businesses that do not need a broad economic revival to meet expectations but, as always, we will also look for opportunities in areas of the market where the falls have been heaviest and where we may not already be exposed.”
