After a three-year underweight to banks, John Bennett at Gam is beginning to buy back into the sector on his two European equity vehicles.
The manager of the Gam Star Continental European Equity and Gam Star European Equity funds says banks will not be allowed to go bust, but will be bailed out by their countrys governments. Many banks are starting to rebuild their profitability, Bennett adds.
We have been underweight banks for three years but we have been a buyer of banks in the last six months, he says.
He owns Barclays, Lloyds and Royal Bank of Scotland in Britain (in Gam Star European only), BNP Paribas and Soc Gen in France, UBS and Credit Suisse in Switzerland, two Nordic banks and no Spanish banks.
In another major strategic call, Bennett has moved into technology stocks with the conviction that the value has gone from traditional value sectors such as capital goods, food manufacturing, tobacco and utilities. This value has migrated into growth sectors such as pharmaceuticals, food retailers and information technology. There is interesting value in technology for the first time in years, he says.
Looking broadly at the economies of the countries in which Bennett invests, he says green shoots at the macro level are irrelevant to the performance of the stockmarket.
In the short term, whether green shoots appear or not wont determine stockmarket returns. Europe has been a low growth area in terms of GDP for over 20 years but it has similar stockmarket returns to the UK. The key factor is the amount of liquidity being hosed at the system, he says.
Generally European governments could afford to implement more dramatic fiscal stimulus, Bennett says, especially Germany which has lagged behind other countries in terms of its spending.
However, he emphasises that what America does could affect what happens in Europe to a greater degree. Ultimately they will dance to the USs tune, he says.