Nutt, manager of the Jupiter income fund and the high-income trust, says the recent rise in share prices of FTSE 100 companies was misleading.
He says that once oil companies are stripped out of these results, performance of the sector was mediocre whereas small and mid-cap companies represent an opportunity.
Nutt warns that interest rate rises may not have peaked despite the housing market showing falls.
He believes that demand for oil and commodities is set to continue and could give further false readings for the FTSE 100 sector.
Nutt says: “Do not let the index mug you. The name of the game is to keep looking for companies offering significant growth that is not reflected in the share price.
“Dividend growth has been very good this year in the value end of the market. Sustainable returns have been achieved by moderation in backing a big number of undervalued comp-anies rather than big bets on a small number of stocks, whether they are index leaders or not.
“Consumers should take heart that when the market falters, this allows us to buy better, growing businesses for them at a cheaper price.”