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Money managers under the microscope

Light at the end of the tunnel?

February 12, 2009

rtxb5afThere’s no shortage of bad news in the financial world at the moment.

But one top hedge fund manager believes that equities could soon be heading for a very sharp rally.

Cazenove’s Neil Pegrum — whose fund┬ámade 9.4 percent last year while markets were plummeting — believes UK equities could soon be enjoying a “March 2003″ rally.

While it seems a long time ago now after the market’s recent woes, March 2003 marked the start of a 4-year bull market which took the FTSE 100 from less than 3,300 to more than 6,700 and saw clever stockpickers reap huge rewards.

Pegrum argues that stocks are already discounting a lot of bad news. He adds that equities look forwards rather than backwards and therefore, as in March 2003, can rally even as analysts are still downgrading corporate earnings forecasts.

His equity long/short fund’s net long position is 14 percent, but he’s planning to increase that this year.

It’s a brave call, especially after so many investors tried to buy stocks on the cheap last year, only to find them getting even cheaper.

But, as John Templeton said, bull markets are born on pessimism. And there’s no shortage of that at the moment.

Comments

Good article – the march 2003 rally was born from the invasions of Iraq and Afghanistan and huge government spending that stimulated the economy.

Is the war over? Is the U.S. in a position to shift that spending back into its own industrializing efforts or is the new economy based on dropping bombs in the desert?

Posted by nystockguru | Report as abusive
 

Thanks. The March 2003 rally seems also to have been driven, at least in part, by the removal of a lot of uncertainty about the U.S. and Iraq. Back to the present time, government spending appears to be materialising in the U.S., but there is still plenty of uncertainty around.

Posted by Laurence Fletcher | Report as abusive
 

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