One of the UK’s most well-known Fund managers, Neil Woodford, has warned of a global stock market bubble. Speaking to the Financial Times, Woodford said he’s been concerned for a year or two and that if this bubble bursts, it could be one of the worst in history.
“Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,” Woodford told the FT. “Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations.
While Neil Woodford shares his views, his own fund is going through a tough time. His ‘Woodford Fund’ is currently returning around 2%, compared with a peer group average of 11.5%.
In the past, the experienced investment manager has also gone through difficult times. He famously avoided tech stocks during the 1990s dotcom bubble. Indeed, Woodford draws on his experience from that period, when assessing the current situation.
'A consistent feature of bubbles is that there is always a subset of the market which falls out of favour as investors clamour for the fashionable stocks of the day, providing the fuel to power the bubble on through the final leg of its journey before it bursts,” he said.
Will Woodford’s strategy pay-off?
“Whether it’s bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility or triple-leveraged exchange traded funds attracting gigantic inflows — there are so many lights flashing red that I am losing count,” Woodford told the FT.
He added his current strategy is to purchase stocks with a specific UK focus. That includes banks, retailers and house builders. Indeed, exposure to UK-focused stocks in his Woodford fund has increased from 41.9% in 2015 to 55.5% in October 2017.
The experienced fund manager admitted his stance was uncomfortable at the moment. But, as he was proved right in the past, he hopes that’s the case once again. “I don’t know when I’m going to be proved right, but I’m utterly convinced that I am right, as I have been right before,” Woodford said.