According to Mott the global economy still faces many challenges and a recovery will come through over the next year or so, but be anaemic and expects sterling to decline over the longer-term.
He says: “The UK and the global economy will suffer several years of sub-normal growth. The UK is in a particularly difficult position given our budget deficit and therefore our growth will be particularly subdued. The future is therefore one of ‘bracing’, but not ‘impossible’, economic conditions.”
Mott intends to gradually reduce exposure to cyclicals within the Psigma fund and increase weighting in ‘best of breed’ companies which will deliver superior growth in a tough environment relative to their peer group.
He says: “This superior growth could be due to either the companies’ geographic exposure, the industry they are in, or the internal dynamics of the company.”
Mott will also increase exposure to companies with large exposure to faster growing areas of the world and reduce exposure to domestically-focused companies.
In the short-term, Mott is keen to capitalise on the market bounce but does not have enough faith in the rally to force a ‘Eureka moment’ and shift the entire portfolio into economically-sensitives like retailers and pub-operators.
He says: “This is not a ‘ringing the bell, Eureka’ moment. In this ‘mid-term report’, we see the market in a remarkable state of flux and we are looking closely at our portfolio to make the next changes.”
Mott says these changes are likely to lead to a significant contraction in the number of stocks and more of a tilt towards major themes.
He adds: “Having had our ‘sleeves rolled up’, trading at the stock level, I can see a period of thematic focus being very suited to the market and the PSigma income fund, soon, but not quite yet.”