Speaking to Brewin Dolphin, the UK equity luminary stressed “economic nirvana” does not await the UK whichever way the vote sways, while the strategies behind his Woodford Equity Income Fund and Patient Capital Trust are unlikely to change.
However, he warned of market and currency weakness ahead of the June referendum, impacting both sterling and the euro.
“Unfortunately the debate in the UK has become both polarised and parochial – it’s a very UK perspective that we take, understandably, but I think this is very important issue for the eurozone and the EU project, and Britain leaving the EU is existential for the EU project as well,” he said.
“I would expect that there could be major concerns about the eurozone project itself if we were to leave, so I would expect the euro to be weak as well. The consequence of that would be the dollar would be strong.”
He added: “I do not normally spend too much time worrying about currency, but that is likely to be the biggest single and most obvious initial short-term impact of a Brexit vote.
“I don’t think Brexit has any impact on the positioning of the fund, and indeed it may be beneficial for the portfolio as it tends to benefit from a stronger dollar and weaker sterling.”
Woodford also spoke of a challenging macro backdrop, with weak demand and deflationary threats meaning he is not optimistic about an inflection point in commodities in particular.
“I am not suggesting that the oil price won’t bounce, but even if it does there isn’t enough appeal in terms of valuation or cashflow that makes me want to change my stance,” he said.
“I think the new dynamic is the outlook for China is deteriorating. I am pretty convinced that the Chinese credit bubble that inflated and was used to finance the massive infrastructure build that took place principally between 2009 and 2012 is in the process of imploding.
“I think that’s going to be hard for the Chinese authorities to navigate through whilst at the same time delivering the kind of growth that we’ve become used to. I think China’s growth outlook is going to slow appreciably from where we are”.
He concluded: “For the world economy as a whole, given that other parts of the world are struggling as well, I think it’s highly likely we slow in 2016 and 2017 and the deflationary threats are there for all to see.”
