Fidelity tells investors to hold nerve ALISON BELL March 1, 2010 - 5:29PM
AAP
Australian investors should hold their nerve and avoid selling shares during an expected mid-cycle bull market correction in 2010, says global investment guru Trevor Greetham.
Mr Greetham, who is Fidelity International's London-based funds manager and global director of asset allocation, says a sustained global recovery will take shape but 2010 will be a volatile, difficult year for equities.
The prevailing gloomy consensus for the world economy was misplaced and about six months stale, Mr Greetham told financial planners during an investment forum in Melbourne.
"We see some exceptionally strong growth indicators - some of the strongest in a generation," he said.
Mr Greetham told AAP that he expects the first two quarters of 2010 will have strong growth numbers driven by companies' top line revenue growth and cost-cutting.
"The first half of this year are when the growth numbers are going to come in.
"We will get some tremendously strong global growth for the next couple of quarters."
He said the broader equity market would be choppy amid a period of consolidation reminiscent of the last bull market's 2004 mid-cycle correction.
"I wouldn't be surprised, given how fragile confidence is, and how pessimistic the consensus is, for us to see some meaningful weakness in stock markets this year."
Market sentiment deteriorated recently and panic levels could recur, presenting good buying opportunities for investors, he said.
Bearish market commentators such as New York University Professor Nouriel Roubini, and the publisher of the Gloom, Boom and Doom report, Marc Faber, "are just wrong", Mr Greetham said.
The strongest synchronised, V-shaped recovery since 1975 is on the way, he said.
This would be characterised by jobs growth, rising inventories and a pick-up in capital expenditure later this year.
Mr Greetham points to loose government policy, rising asset prices, falling unemployment and lots of spare capacity in the world economy as to why a sustained global recovery is well underway.
"I think it's a fundamental recovery in asset prices. The money printing the central banks have been doing has actually succeeded in triggering a recovery in asset prices."
Skyrocketing public sector debt around the world poses little threat to the global recovery, which would be strong enough to generate enough tax receipts to pay down the debt, he said.
Mr Greetham also said inflation would cause near-term spikes in commodity and energy prices.
As well, China may be forced to tighten monetary policy when its inflation rate climbs into double-digits over the next two years.
Spare capacity in the US economy will prompt American inflation to fall over the next few years.
Mr Greetham said Australian investors should diversify across asset classes, but keep half their assets in bonds and cash.
"I really don't want to give up on equities with such a strong global backdrop, so I've been reducing my overweight allocation in equities rather than selling out," he said.
