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Harries: Blue chips look set for rise to premium prices

Newton global higher-income fund manager James Harries believes blue-chip stocks will soon be attracting a premium.

Speaking at the Fund Strategy Investment Summit in Kitzbuhel, Austria last week, Harries said there are now a number of quality large-cap blue-chip global companies offering decent yields that are being ignored by investors.

He said: “We think that once some of the problems the market is besieged with are played out, these companies have to attract a premium as people will rush into them and will thank themselves for doing so given their inherent dependability and predictability.”

Harries said the Newton global higher-income fund currently has 50 per cent in large-cap stocks compared with 30 per cent before the credit crunch.

He also said the market will see shorter cycles as the days of governments being able to drop interest rates and encourage greater debt in order to dampen and lengthen the business cycle are over.

He said: “Shorter market cycles are likely to be the norm in the future as we see higher degrees of volatility and less consumption augmented by increasing indebtedness.

“The difficulty is we never knew when the market would hit the limit for leverage until it well and truly happened in 2008 and we are now in the deleveraging phase, with the credit crunch more of a process than an event.”

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