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Growth stocks to suffer for five years, says Mott

Growth stocks have no chance of staging a comeback for another five years unless the economy slides into a major recession, according to the UK&#39s leading income manager Bill Mott.

Speaking at the Hargreaves Lansdown conference in Bath last week, Mott – Credit Suisse&#39s top-performing income manager – said he did not see where there was enough shortage of capacity in the UK economy for growth to return.

In the anaemic corporate earnings&#39 environment in which the UK is mired, Mott said it would take great technology innovation – which he considers unlikely – or a massive recession to lay the groundwork for growth stocks to justify their current price/ earnings ratings.

If neither happens in the near future, Mott said it will be five years before growth could again rival value stocks.

However, if the economy were to fall into negative GDP, which would erode surplus capacity, Mott said growth could rise sooner although, with low interest rates effectively postponing a recession, he suggested it was unlikely.

He said: “It is not possible for growth to make a comeback. There is not enough earnings&#39 momentum to justify ratings, which presume a higher level of growth than is possible. Only through a lot of pain – a huge recession – can they recover.”

Hargreaves Lansdown investment manager Ben Yearsley says: “I would have to agree. The economy is not doing well enough to generate decent earnings&#39 growth.”


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