Mark Dampier: Is it time to go on the defensive?
Saturday 09 January 2010
At this time of the year newspapers are filled with predictions for the months ahead. The one prediction I can make with confidence is that they are mostly going to be wrong. Trying to forecast a market's level in a year's time uses up plenty of column inches but is really just a matter of pure guesswork.
Before I am called a hypocrite because I have done it myself, I have always told editors that they should take any forecast with a pinch of salt. However, from a private investor's point of view, market predictions can be quite interesting: in fact, they can actually be helpful. Why? Because if you can find a real consensus amongst the experts, you can often find the very thing not to do!
I note, for example, that many are keen on emerging markets this year. So am I, although I have been a fan of this sector for over 20 years and remain very positive over the longer term. Nonetheless, in the last couple of days I have grown a little wary of the sector in the very short term.
Valuations, as yet, don't look too demanding but the fact remains that they have had a tremendous run from the lows in 2008. (In some cases markets have risen 100 per cent or so.)
I would therefore suggest that if you are keen on this area you do one of two things: start a monthly savings plan, which will even out the fluctuations in the stock market over time; or, for those of you who want to invest a lump sum, why not just wait a little. With experts such as Mark Mobius from Templeton Emerging Markets suggesting a 20 per cent fall at some stage, that will be the time to invest.
Instead, might it be that the developed world surprises on the upside? Everyone has written off Europe, the UK, America, and obviously Japan, but in stock market terms they might do better than you first think.
The UK is a perfect example with the economy looking absolutely dreadful. If I had a brick laying next to my sofa at home, I probably wouldn't have a television anymore judging by the amount of time I spend screaming at the senseless politicians who talk about nothing other than how to spend money they don't have.
Sterling has had its biggest fall since we left the ERM in 1992 and, having just come back from holiday, I can certainly confirm that going overseas is very expensive. When a steak costs $25 in a very mediocre Australian restaurant, you know something is up.
However, a weak pound might not be so bad for the UK stock market where three quarters of earnings comes from overseas; there could be an increase in profits simply through the deterioration of sterling. It is therefore essential to divorce the stock markets of the world from their economies, because they can behave quite differently. Combined with the huge private sector cost-cutting that we have already seen, the fall in the pound could well provide hope for the UK stock market.
One area I think is particularly cheap within the UK market is blue chip, defensive shares. UK income funds have been hit hard over the last two or three years, yet funds such as Newton Higher Income yield some seven per cent.
The likes of Invesco Perpetual High Income, among others, are full of companies that will not only survive but prosper through a difficult recession in the UK. I believe they deserve, and will achieve, a re-rating. So don't write off the UK and put all your money in emerging markets just yet.
The UK is a cheap area and, on a global basis, so too are the big, blue chip defensive shares on high yields. Over the next few weeks you will see one or two funds in my column that reflect this theme.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Keira Knightley topless: Conservative actress does own take on #Freethenipple campaign for Interview Magazine
- 2 Argentina may change its capital city from Buenos Aires, says president
- 3 Joan Rivers: 'Palestinians deserve to be dead'
- 4 The 3D-printed key that can unlock anything
- 5 Lady al-Qa’ida: On the trail of Dr Aafia Siddiqui, the world’s most wanted prisoner
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
- < Previous
- Next >
iJobs Money & Business
Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...
£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...
£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...
£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony