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Franklin’s Russon benefits from retail and favours pharma
by Eleanor Lawrie on Jul 17, 2014 at 14:41
‘I suppose the challenge for the market in the short term is the ongoing debate about interest rates and when we will see the Bank of England (BoE) raise rates,’ he said.
‘That is one thing people have been grappling with, alongside the strength of sterling, which has been a considerable headwind. Many companies have investments overseas so that has been another challenge for the UK market.
‘There are these challenges out there but it’s fair to say we are positioned for that outlook.’
Russon is watching closely to see whether the stabilising but fragile UK economy can stand on its own two feet without central bank stimulus.
‘My personal view is that the GDP data has been reasonably robust, but the broader economy is dependent on a high level of support from central banks. [BoE governor] Mark Carney refers to escape velocity, but the question is whether markets can survive without their support. In my view, that will be a challenge.’
However, the manager is heartened by the strength of the UK housing market, which he said is good news for the consumer.
‘The strength of housing has given the consumer recovery a lift and the consumer is in better health than 24 months ago. However, he added that the advent of rate rises which the Bank of England is keen to stress will be gradual would be the next test for the consumer.
Accordingly, some of the stocks most beneficial to the fund in the past year were retail names. These have profited from the consumer recovery story, for example Next, which Russon said had executed very well.
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