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 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: “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.”
Buxton adds that fears of a ‘hard landing’ in China will ease with better economic data and modest policy stimulus.
Dennehy Weller & Co managing director Brian Dennehy says: “We are still in a long term bear market that started in 2000. We are towards the top of the range in stock market valuations and there are still huge debt problems. We also have the Eurozone in the background which can explode any moment. It is the earnings cliff in the US we should be concerned about not the fiscal cliff.”