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Cheap may become cheaper

Cartesian fund manager Jeremy Hall believes the FTSE 100 could drop below 3,600 although he is expecting to see increasingly attractive valuations in the next 12 to 24 months.

Hall says further bad news from distressed companies could push the index lower.

He says: “Earnings’ expectations are too high and are now starting to fall fast, while more questions will be raised on earnings-based valuations. I expect that we will see a number of downgrades in the coming months.”

Hall, who manages the UK equity 130/30 fund, says the “two-speed” nature of the portfolio allows the firm to pick up companies that look cheap while being able to steer clear of potential value traps.

He says: “Valuations are at such a fascinating stage, given the opportunities they represent in the market. The problem is that people could be fooled into cheap opportunities, particularly in the likes of mining and cyclicals, that may appear cheap but could actually fall even further.”

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