View more on these topics

Schroders’ Richard Buxton predicts start of equities bull market

Richard Buxton 480

Schroders head of UK equities Richard Buxton has called the beginning of a bull market in equities.

Buxton, who runs the £3.1bn UK Alpha Plus fund, predicted in 2002 that there would be a period where the equity market would go sideways and that while there has been a total return from the market over the last 10 years, it has been primarily made up on dividends.

He now predicts we are now in the “foothills of a new bull market”. Buxton says it is starting valuations, not the economic outlook, which are key to future returns.

Buxton says: “From today’s valuations, a PE multiple of 11 times, the next 10 years should provide positive real returns for investors, possibly double-digit per annum, despite the economic headwinds we face.”

He adds that growth could be subdued, but a lessening of extreme fears could see equities re-rated nevertheless.

These three fears Buxton flags are whether US can avert the fiscal cliff, will China achieve a ‘soft’ landing and whether Europe will make notable progress in addressing the sovereign crisis.

He believes over the course of next year fears will reduce on all three fronts.

He says: “The US is likely to agree a fiscal policy which turns the ‘cliff’ into a gentle slope. Given that US banks are creating credit again and that an improving housing market is underpinning consumer confidence, a positive agreement will reassure US corporates.

“Having held back on spending ahead of the Presidential election and the ‘fiscal cliff’ negotiations, a satisfactory outcome should see a resurgence in investment and orders. Stronger activity in the US could lead global growth in 2013.”

Buxton adds that fears of a ‘hard landing’ in China will ease with better economic data and modest policy stimulus.

He adds: “Against a background of improving activity in the US and China, even Europe may fail to dominate investor sentiment.”

Buxton says: “Risk appetite will continue to ebb and flow with the macroeconomic data, but an improvement on the deteriorating trend of recent months would help reinforce a potentially virtuous circle of improved corporate confidence and investment.”

He says positive signs to watch out for next year are the Federal Reserve moving away from QE or signs that interest rates may rise sooner than as currently flagged in 2015.

He says: “Now that US banks are creating credit once more, a signal that monetary policy is moving out of emergency mode back towards more normal settings may reinforce CEO confidence rather than undermine it.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com