Ramos-Martin, who runs Standard Life European Equity Growth, adds that unless merger and acquisition (M&A) activity significantly increases, the rally in European markets cannot continue."Companies are all cash-heavy at the moment and have more money in their accounts because they have been so cautious recently," he said.
"If they feel more confident, capex [capital expenditure] will go up. However, we need a period of low volatility for companies to take part in M&A activity, which would in turn attract more investment."
"However, if this does not happen, then we are never going to get out of the current environment of low growth."
"M&A activity and Capex peak when markets do, as we saw just before the tech bubble and in 2007. It is very difficult to predict when companies will start spending and you cannot invest on a perception of when you think it might happen."
Despite his concerns over the lack of corporate spending, Ramos-Martin thinks that the ingredients are there for equities to have a strong run.
"We have seen markets go up 10 to 11 per cent so far this month, which I don’t think is sustainable on a monthly basis," he said. "However, although I am not completely bullish, I am constructive for the future."
"Policy makers like the ECB have provided a backstop which has decreased the tail risks and led to a reduction in uncertainty. For instance, in July private equity firms were putting 10 per cent on top of their normal premium in fear of the euro collapsing."
"However, now risk premiums have come down, investors need to be a lot more selective," he added.
Ramos-Martin has headed up the £59.2m Standard Life Investments European Equity Growth fund since October 2010.
According to FE Analytics, the fund has slightly outperformed the IMA Europe Ex UK sector – which is also its benchmark – over that time.
Standard Life Investments European Equity Growth has been a second-quartile performer over three and five years, but returns of 27.31 per cent mean it is a top-quartile performer over 12 months.
Performance of fund vs sector over 1yr
Source: FE Analytics
The fund has a higher annualised volatility than the sector over one year, though.
Ramos-Martin says the current good feeling surrounding the markets means that certain equities will be over-bought, which highlights the importance of bottom-up analysis.
"You need to be a stock picker at the moment," he added.
"If you take a top-down approach, it might lead to taking a euphorically positive decision, but it all depends on the stock, as there is the risk that you are buying on expectation. What we are trying to do is separate the wheat from the chaff."
Ramos-Martin calls this approach "focus on change", as he is trying to find companies that have been unfairly rated by the market but that still have good growth potential.
"Renault is one of the best examples of this," he said.
"The first part is that the market says the core business model is not very good and it is too heavily focused in France. What we think they are overlooking is the effort Renault has made to concentrate on emerging markets."
"They are also making very low-priced cars for the developed markets, which at around £6,000 each are very appealing. On top of that they have entered a joint venture with Volkswagen, because before, the amount it cost to produce their larger cars like the Laguna was too expensive."
"However, by using Volkswagen’s platform, they are saving cash because they are using depreciated technology – which is good for the margins."
The four crown-rated Standard Life Investments European Equity Growth fund has a total expense ratio (TER) of 1.68 per cent and requires a minimum investment of £500.