Gartmore's star smaller companies fund manager Gervais Williams is looking back to the 1930s as a guide to the markets current trajectory.
Williams manages the Gartmore UK & Ireland Smaller Companies (Gartmore UK & Irish Small Companies) unit trust as well as investment trusts Gartmore Growth Opportunities (GGO), Gartmore Fledgling and Gartmore Irish Growth .
He told Citywire: 'A lot of share prices have risen a long way and it is natural now that they take a step back. I think markets are flat lining and that will continue.'
Williams parallels the current recovery to the situation in the 1930's, which he points out was a time when deflation was also a big worry. He said: 'It's following exactly the same pattern to date.'
If the markets continue to follow the same pattern Williams expects an uneventful 12-18 months before there are further pronounced gains. However, Williams believes there are and will be excellent opportunities while the overall market performance is flat.
He highlighted Baggeridge Brick (BGBK) as one such situation. He thinks it is a strong company set to benefit from an long awaited upturn in the brick industry. He is also very keen on the prospect of insurer Alea Group Holdings (ALEA). He thinks that many other investors under appreciated the company at the time of its float. Alea has inaugural results out on Monday.
The Gartmore UK & Irish Smaller Companies fund is up 99% over five years compared with a 40% rise by the FTSE Smaller Companies index. Over a year it is up 87% against a 45% rise by the index.
The fund's top 10 holdings are Evolution Group, Quintain Estates, Baggeridge Brick, Findel, Irish Continental, Northgate Information Solutions, Lookers, Iona Technologies, Pharmagene and McBride.