Anthony Bolton, the UK’s most successful stock market investor, is resolute that the market has bottomed out and believes now is the time for investors to be climbing back into risky assets.
Speaking at a lunchtime seminar hosted by independent financial adviser (IFA), Saunderson House, the president of Fidelity International, said in no uncertain terms that he expected the tide to turn for equities. "Investors should be getting into risky assets such as equities, corporate bonds and property - now is not the time to be in cash or government bonds," he said.
Debating whether equities are the right investment in the current economic climate, Mr Bolton said that while he has only taken to predicting the stock market a few times in the last 10 years, this is one of the few times that he feels very strongly about his views.
He explained that he looked at three factors in order to time the stock market - the patterns of bear and bull markets, sentiment and valuations. "I do not base my views on an economic view - it always looks good at the top and terrible at the bottom," he added.
Pointing to the unprecedented fall in the market - second only to the fall during the 1930s Depression - Mr Bolton said that while the crisis has been the worst that he has witnessed in his lifetime, he expected we had passed the low. "I have seen five banking crises but this has been unprecedented in terms of scale and also in terms of the action from governments." He added that measures taken by the government might have been too much: "I think it might have been overkill."
Mr Bolton thinks the size of the money market in the US relative to the stock market is a positive indicator of money waiting to enter the stock market. "The size of the money market has gone from around 25 per cent in the 1990s to a figure of 47 per cent in March - this just tells me that there is a ton of money on the side in the US. People are afraid of losing their money, but once trust is re-established this money will come back into play."
He also picked out the low exposure hedge funds currently hold to the stock market and the very low valuations of large US companies. "The economic data is becoming less mad, and I expect, during the third quarter of this year, the US will go from negative to positive growth."
Mr Bolton expects the bull market to be front-end loaded, with growth being slower due to the debt overhang in the Western World.
