Fidelity fund star Anthony Bolton says he is still bearish on the market and warns there is a 50/50 chance that the US will fall into recession.
Speaking at a Morningstar conference in London last week, the Fidelity special sits manager said the market has moved from “the greed to the fear stage” and it is impossible to know the extent of contagion from the US sub-prime crisis. He said: “We can only see the ripples and no one knows what is underneath, hence we cannot analyse it.”
Bolton said value opportunities are very scarce and he has taken some short positions using Ucits III powers. One sector where he is favourable is media from a contrarian perspective.
He warned that the credit crunch is a “real world” event and is not just limited to finance and could ultimately drive a recession in the US.
Bolton says that following a four-year bull market, he has taken a bearish view because opportunities are scarce while risk appetite has been high with people not paying enough attention to the spread between risky and less risky assets.
He says there have been big gains on a lot of cyclical assets, which is always a warning sign and also pointed to the commodities and infrastructure bubbles.
Bolton said the exceptional private equity deals have also been a cause of the current squeeze in the market.
He says: “If you looked at the sort of deals that these firms have been doing they have been extraordinary. One investment banker I spoke to said he had never experienced a market like this in 25 years.
“You also have structured credit, which, to me, has some of the similarities to the split-capital investment trusts by being based on models with assumptions which turned out to be poor.
“People have bought safe things which have turned out to be anything but safe and that is the biggest mind change the market can see and that will not go away quickly.”