Littlewood, whose £550m fund celebrates its first anniversary this month, has dropped the cash weighting from 25 to 13 per cent and says he will look to drop his weighting further should the market continue to fall.
In the past few days the FTSE 100 has breached the 5,000 barrier, with the blue chip index seeing more than 10 per cent wiped off its value in just over a month after hitting a 22-month high in April.
Littlewood says: “I have mainly been adding to the stocks we have, though I have bought my first mining share with Rio. My view of the world has not changed, we are moving from deflation to an inflation world, which will be bumpy. But the desire from central bankers to avoid debt deflation seems strong as every time we hit a hurdle they seem intent to spend money.”
Littlewood adds: “If the market falls further and we get bullish we will run this like a long-only unit trust for a while. It is not far away and if it hits 4,800 we will spend. That said, if it bounces to 5,800 we would be selling.”
Littlewood says that his comments at launch that this was a balance sheet recession still hold true 12 months on and that had nothing been done the result would have been a market similar to that of the 1930s.
He says: “Mature economies are still holding interest rates at nearly zero per cent which gives the impression that monetary policy makers still believe this is a balance sheet recession and these recessions linger and leave their mark on society as consumers would rather save than spend.”