PSigma income manager Bill Mott believes domestic stocks are set for a turn-round and current ratings represent a once-in-a-decade opportunity.
The former Credit Suisse manager views a number of sectors as attractive and says the scaledown bears no comparison with the early 1990s.
He says: “There are so many opportunities out there and unless there is an Armageddon situation, the likes of which we have only seen in the 1930s and 1970s, then it looks like a great opportunity to me.”
Mott’s portfolio contains 90 stocks with an historical yield greater than 10-year Government bonds. He says the previous two occasions he has done this have turned out to be major buying opportunities. He says: “The market now is not too dissimilar to what we saw in 2003 just prior to the Iraq war and it should end up in the same buying opportunity that I had when I ran the Credit Suisse range, which made investors a lot of money.”
Psigma income has grown to £237m following its launch in April 2007. It is currently weighted strongly in favour of mega-caps, with 79 per cent in the FTSE 100. Mott is overweight in banks at 17 per cent and financials generally, saying they look cheap in the medium term.
He says: “This is almost an Alice in Wonderland market where lower interest rates do not affect inflationary pressures. There will be a drop in interest rates in the next year to help the economy but, although the Bank of England has an inflationary target of 2 per cent, all the dri-vers for inflation are external to the UK market.
“The real ones are energy, food and commodity prices, much of which are from emerging markets. The domestic demands for inflation are depressed.”