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Artemis’s Littlewood believes UK is facing 1930s style recession

Artemis fund manager William Littlewood believes the UK is facing a 1930s style recession which could be ‘nastier’ and longer than expected.

Speaking yesterday at a briefing on the launch of his new strategic assets fund, which goes live in May, Littlewood said the UK was treading down a similar path to the 1930s which could take a number of years to extricate from.

He said: “This is not an ordinary recession, it’s the result of a massive credit bubble. There are still a lot of investors who think this is a normal but very nasty deep recession but we’ll get out of it.”

Littlewood said the record fall in commodity prices last year, the enormous percentage of banks that have gone bust or near bust and global trade figures, particularly in Asia, offered all the hallmarks of a severe recession.

He said: “Everything so far suggests this is extremely nasty, it’s the 1930s and because it’s not a normal recession we won’t get out of it very fast.”

Littlewood said the key difference marking the two eras apart was the scale of government intervention. He says: “Politicans and monetary policy makers are petrified of debt deflation so will do everything they can to stop deflation. So far we’ve seen enormous fiscal stimulus and we’ve also seen quantitative easing. In my view it’s not enough, they’re going to need more to turn things around.”

He said this intervention will inevitably lead to an inflationary environment further down the line. He said: “It’s not now as you can see from government bond yields and putting a timing on it is extremely difficult. It could be one year away it could be further but within a certain number of years we will be in an inflationary era.

“I don’t think they will be able to pump in enough money to the system to resuscitate it and get us back to the old Goldilocks economy with low inflation and decent growth.”

Littlewood painted a grim outlook for the UK economy and said double-digit inflation would not be a surprise. He warned that figures could worsen if politicians and monetary policy makers handled the situation badly.

He anticipated a secular and generational shift which would see the UK population become more debt adverse and said this would partly determine how long and deep the recession would be.

Given his bearish view on the global markets, Littlewood said his new fund would be defensively positioned at launch but said the flexible Ucits fund structure would allow him to take a more aggressive stance when the timing was right.

He said: “It’s just possible we did hit the bottom a month or so ago but I think there’s more to come. At some stage when we get inflation I expect to be in long-only. In inflationary times you want to be in real assets which give you inflation protection, which is not cash and manifestly not long dated government bonds.”

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