Woodford says that he is seeing no green shoots and questioned the belief of some commentators who thought there was a chance of a market turnaround in the second half of this year.
He says: “We are in a pretty difficult economic environment with the US and the UK having a particularly difficult time. I expect to go on well past the second half of 2009.
“This crisis will encompass a prolonged adjustment. We have seen 15 years of benign conditions as debt has built up in the economy, the extent of which it is still unknown. To re-balance that domestically and globally is going to take a number of years.”
Woodford does agree with Fidelity’s Anthony Bolton that we are approaching the bottom of the market but warns that investors should not expect everything to improve from here onwards.
One area that the income and higher income fund manager is still cautious on is banks, which he believes are unlikely to become attractive in the next three years.
“It is clear that now is not a good time to be in bank equities as we are not sure of the quantum of bad assets. But they do have plaudits and should make a return as the economic environment improves.
“I think that following the announcement of the Government’s Asset Protection Scheme we have now seen most of the ammunition fired in an attempt to recapitalise the banks. The next question is nationalisation, though some may argue it has already happened, and if the need is there I am in favour of it taking place.”