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Bulls versus bears: will fortune favour the brave?
by Eleanor Lawrie on Feb 19, 2014 at 11:56
Following one of the most impressive years for the FTSE 100, managers are split over whether the market is teetering on the brink of a sharp correction, or can sustain its momentum.
Softer data in the first six weeks of 2014 and a number of corporate earnings disappointments have led to an uptick in market volatility that has widened the gulf between the bulls and the bears.
Fearful of losses, bearish managers have started to stockpile cash in an environment they say looks unjustifiably expensive.
Meanwhile, the bulls are building up exposure to riskier areas of the market such as Europe and Japan, mindful that taking a defensive stance last year caused some funds to painfully lag the rally.
‘We saw so many fund managers walk through our doors in November and December that were bullish that it made us fairly nervous. I always think when you see a consensus like that, you look for the contrarian view,’ he said.
His portfolios are currently at the upper end of their historical cash weightings, at the expense of bond exposure.
‘We think markets have gone too far, too quickly, and lots of the optimism in the future has been priced in,’ he argued.
And Husselbee is not the only manager braced for a potential correction.
Marcus Brookes, head of multi-manager at Schroders, has built up the cash in his flagship £1.3 billion Multi-Manager Diversity fund to almost its highest ever weighting, as he warned the bull market could end ‘when people aren’t expecting it’.
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