Argonaut Capital partner Barry Norris says he expects the market to rally by another 15 per cent in the next few months.
He says the market is currently in a sweet spot and believes that cyclicals still look the more attractive option ahead of defensives.
He says: “It is important to recognise that we are still in recovery and that investment in the market remains low. I feel that, having seen cyclicals downgraded by as much as 50 per cent, they still represent good value.”
Norris says he understands why people who are invested heavily in defensives would choose to sit on them and he will eventually look at them once cyclicals look fully valued.
He says: “You would hold defensives if interest rates go up but that does not look a likely scenario at the moment, although it may be later in the recovery.”
Norris’s comments are in stark contrast to the comments of Invesco Perpetual fund manager Neil Woodford, who believes defensives look the most attractively priced investments.
Chelsea Financial Services managing director Darius McDermott says: “If you have the view that the world is in recovery, then cyclicals are the place to be. We may end up with a broader rally that sees a number of stocks on the rise.”