GLG’s White dismisses double-dip recession concerns
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GLG head of UK equities John White has dismissed fears of a double-dip recession, claiming the concerns are “significantly overdone”.
White says that although the deficit is large, it is more pro-cyclical in nature than the markets believes.
He says: “The 2009 consensus forecast was £185bn but it came in at £155bn. And deficits are very pro-cyclical; they get materially better as the interest cost of the burden decreases. I’m not sure the market has really understood that yet.”
White says that despite spending cuts in the public sector, inflation will remain high with the Bank of England taking the risk of keeping rates low in order to boost growth and provide another “tailwind for the deficit.”
White says: “As soon as the market begins to realise that gilt issuance is not going to be £180bn over the next 12 months, but more like £140bn or £130bn, then the whole mindset around the economy and sterling - and assets more broadly - could change quite dramatically.”
He also remains bullish on UK equities, highlighting strong consumer and corporate balance sheets.
White says: “Our earnings forecasts suggest the UK equity market is about as cheap as it’s ever been.
“People get caught up with what’s happening in Greece, Hungary and Spain, but these stories are very, very different to the UK situation.”
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