Making his 22nd annual address to UK fund managers, Mr Farrell said the last two years had seen the best returns from US stocks since 1954 and 1955. But he said the pattern of last year, with small capitalisation stocks topping out in the first half and large companies taking up the running in the second, was indicative of a maturing cycle.
Quality shares may be nearing "at least an interim peak", Mr Farrell said. The trigger could be a further attempt by Federal Reserve Board chairman Alan Greenspan to cool Wall Street's current euphoria.
Mr Greenspan's comment just before Christmas about the "irrational exuberance" of markets, which caused share prices to tumble, was not just an "accidental phrase", he said. This time 100 million mutual fund holders could be hit in any share slide, compared with just 30 million in the 1987 crash.
Mr Farrell said he expected that the final peak would be reached later in the year, with earnings disappointments and the threat of higher interest rates hitting sentiment.
Investment column, page 18