Investors who are warning of a market pull-back are just frustrated that they have missed the rally, according to Darwin’s David Jane
Jane, who runs TM Darwin Multi Asset
, has a bullish outlook for global markets and says concerns over a correction are being hyped up by commentators who want to make money from cheaper valuations.
So far this year the FTSE has returned 9.69 per cent and at the time of writing it is at 6,440.
Jane, former head of equities at M&G, believes this is the beginning of a bull market, and warns investors not to get bogged down in short-term market volatility.
"There is clearly going to be some sort of correction because markets don’t go up in a straight line; however, I’ve been reading a lot of stuff from brokers around the country who are saying there has to be a 5 per cent correction in the markets."
"But really, the majority of people who have been banging on about a correction are frustrated they have missed the rally and they want the markets to drop so they can get involved."
"I met a high-profile industry pundit the other day who said: 'You are quite a rare individual because you were bullish and have remained bullish.'"
"There are a lot of people who are desperately hoping the market falls back so they can participate in the rally."
"Yes they could always flip back, but why? We had the madness surrounding the Italian elections and what did that do – on a three-day view, the FTSE was actually higher."
Jane has managed the £19m TM Darwin Multi Asset fund since its launch in June 2011.
According to FE Analytics
, over that time the portfolio has been a top-quartile performer in the IMA Mixed Investments 20%-60% Shares sector, with returns of 14.13 per cent.
Performance of fund vs sector since June 2011
Source: FE Analytics
The fund has tended to be more volatile than its peers, however.
It has had a particularly good run during the market rally of this year and tops its sector in 2013.
Jane says that the uptick in global equity markets is a byproduct of a shift from fixed income assets into equities.
"The environment we are in is one where there is a correlation of interests between governments and central banks," he explained.
"The main pillar from that is this so-called great rotation and you can see the point. Governments and central banks want us to move into equities to create jobs and stimulate growth."
"You can’t fight against them; they have a bigger stick in the market now. You can understand this rotation because there is such under-investment in equities and real assets as so much money has poured into fixed income."
"Now there is a lot of evidence to suggest economies are recovering and equities offer better value. Equities are even yielding higher than high yield bonds – which has never occurred during my career," he added.
The manager says that investors can afford to remain bullish in spite of the recent surge in markets, as there has been an increase of M&A (merger and acquisition) activity.
"One of the big things to have changed recently is a pick-up in corporate sentiment," he continued.
"We have seen the likes of Mr Buffett putting money to work recently."
"We had a big day yesterday as one of our holdings – Vodafone – looked like it had come to a resolution with Verizon, which was very good news for shareholders."
"Big corporates don’t make these decisions if they are not comfortable – those are the rules of the game."
"After seven years of benign growth, only now has the Dow hit its 2007 highs. Yes of course there will be some sort of correction, but who can predict when that is going to happen?"
"I take a long-term view and with that rationale I think the best idea is to participate in the rally," he added.
TM Darwin Multi Asset has 49 per cent in equities and 22 per cent in fixed income. Jane says he has held more cyclical stocks for the last few months and is now finding more opportunities in the peripheral bond market.
"We had a lot of exposure to Japan before the election, which really helped the fund. In other markets, we have moved from defensive positions into more pro-cyclical stocks like Home Depot and, in Europe, Continental."
"We have some exposure to some Italian corporate bonds and govies. We are getting yields of around 3 or 4 per cent and I don’t think there is any chance of a default. However, they are very short duration."
TM Darwin Multi Asset requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.86 per cent.