Henderson director of fund of funds Mark Harris expects developed markets to outperform developing economies this year.
He says emerging markets and Asia are moving from a mid to late cycle while developed economies in Europe, the US and, to a lesser extent the UK are seeing more growth, marginal inflation and loose monetary and fiscal policy.
Harris says: “We have seen an extremely robust recovery in a number of emerging economies as a result of loose fiscal and monetary stimulus. A number are also tied to the US dollar. We are now seeing the US recover, which is not good news for these emerging markets, many of which are near post-Lehman market highs.
“A lot of money is now in markets that have seen exceptional growth and are exposed to huge inflationary pressures.”
Writing in this week’s Money Marketing, FundQuest director, head of global equities Hans Hamre says: “Emerging market equities remain attractive in terms of traditional valuation despite the disappearance of the risk premium compared with developed countries. The growth outlook for emerging countries is such that their equities still seem relatively undervalued.”
Harris says he expects the market to correct by 4 to 5 per cent over the next couple of weeks.
He says: “We have introduced futures on our products again as we expect this correction. If it does happen, we will take those futures off and use what cash we have left in the portfolios to increase risk.”