His comments come in light of a 1 per cent gain for the FTSE 100 today at the time of writing, which followed a steep fall in the index from highs of about 6,800 a month ago to 6,000. "We’ve had a very good, decent correction," said Hargreave (pictured).
"However, we expect to see the market consolidate around this level before going up again."
"We thought 6,000 was probably a good level to consolidate from and the FTSE is doing quite nicely today."
Macro issues such as monetary and political policy announcements in China and the purported ending of QE in the US have done little to shake the FE Alpha Manager, who remains bullish in spite of the sell-off.
"The Chinese situation is not too bad. I think the Chinese government knows what it’s doing," he said.
"Bernanke is doing the right thing. You can’t keep pumping money into the market, otherwise you’re just going to get inflation, and there’s no inflation in the US market at the moment."
Hargreave is also optimistic on the outlook for his own market – the UK – which he thinks is showing signs of recovering.
"The US is clearly improving. The UK is behind the US, but the UK economy is definitely getting better," he said.
The manager says the bond market is more of a concern at the moment and that while yields are manageable at their current levels, there could be significant knock-on effects should they spike again.
"We need the bond market to settle down at these higher levels," he added.
US 10-year bond yields are currently at around 2.5 per cent – an entire percentage point higher than they were a month ago, while gilts have risen to their highest level in two years, at 2.48 per cent.
Hargreave heads up the four crown-rated Marlborough Special Situations fund and the five-crown rated Marlborough UK Micro Cap Growth portfolio.
Both funds have outperformed the IMA UK Smaller Companies sector over the medium- and long-term.
Over the last five years, Marlborough UK Micro Cap Growth has gained 104.77 per cent compared with 77.6 per cent from the Special Situations portfolio and 54.79 per cent from the sector, according to FE Analytics.
Performance of fund vs sector over 5yrs
Source: FE Analytics
Both funds have lagged the sector's 24.67 per cent returns over the last year, however, picking up 22.62 and 22.34 per cent respectively.
Hargreave says one area that has been feeling the pain even more in the market selloff has been natural resources.
One of his top holdings – natural gas and iodine exploration and development firm, Iofina – saw its share price collapse yesterday, before rebounding strongly today, underlining the pronounced volatility in the current market.
The British holding company accounts for 1.5 per cent of the £627.5m Special Situations fund, making it Hargreave’s second-largest holding.
"There’s been a bit of a drama about Iofina. I wasn’t in the office yesterday when the share price fell, but if I was, I would’ve bought more," he said.
Hargreave says he is not contrarian enough to start buying up out-of-favour mining stocks, which have been battered this year as commodities took a hit.
"It’s interesting but [I’m not ready to buy] just yet. We need to see something more positive in the price of commodities or in the demand for commodities," he said.
Ionfina is the second-biggest bet in the small cap portfolio, but Hargreave keeps all of his holdings small, investing in approximately 250 stocks.
The manager has not picked up many bargains in the sell-off because he has remained fully invested throughout the year.
He is holding just 2 per cent in cash in his Special Situations fund and 4.8 per cent in Marlborough UK Micro Cap Growth.
The Special Situations fund is tipped toward industrials, at 31.6 per cent. Services make up the second biggest weighting in the fund, followed by telecommunications, media and technology stocks, and financials.
The Micro Cap Growth fund, which invests at the very smallest end of the market cap spectrum, has its highest weighting in telecommunications, media and technology stocks, but still holds a large portion in industrials.
Both funds require a minimum investment of £1,000. The Special Situations portfolio has ongoing charges of 1.53 per cent compared with 1.54 per cent from the Micro Cap Growth fund.