Neil Woodford, one of Britain’s most respected fund managers, has warned that the general election could trigger years of turbulence for the stock market and prolonged weakness for the pound.
Mr Woodford, who until a year ago worked for Invesco Perpetual managing fund portfolios worth £33bn, said the election would have an unprecedented impact on share prices. In a wide-ranging interview with The Daily Telegraph, he also raised concerns about a growing “anti-business” culture and the threat posed to industries such as energy.
He made his comments in a week when business shifted to the centre of the election debate. A coalition of more than 100 senior business figures warned in a letter to the Telegraph that a Labour government would “threaten jobs and deter investment”.
Mr Woodford said previous elections had mostly been “pretty unimportant for stock markets and equity asset prices particularly in the UK. I think now we’re in a slightly different place, given the political uncertainty and given the influence that fringe parties are going to have.”
Forecasters predict a hung parliament on May 7 with both the Conservatives and Labour unlikely to be able to form a stable coalition. Even if an agreement is reached, Mr Woodford fears it would fall apart before its statutory five-year term, with uncertainty blighting investor confidence in the intervening years.
Other factors, such as the prospect of a referendum on EU membership or a re-run on Scottish independence, would also unsettle investors. - Neil Woodford: 'Some parts of biotech are in a bubble' The warning comes days before the end of the tax year when investors rush to buy stock market Isa funds.
Mr Woodford said: “Can you expect Scotland will be part of the UK if the SNP is supporting a minority Labour administration? What will happen to Britain’s membership of the eurozone? These are big uncertainties that won’t become that much clearer after the election.”
As for sterling, he said it was “in the middle” as the euro weakened because of the European Central Bank’s stimulus measures and failing economic growth, while the dollar’s strength stemmed from America’s recovery and “increasing uncertainty about the world economic order and increasing political uncertainty”. Regardless of the outcome of the election he also raised concerns about valuations.
Mr Woodford, who runs his own company, Woodford Investment Management, was one of the few fund managers to sidestep the dotcom boom and bust in 2000. He said the challenge was to focus on fundamentals and valuations, adding: “To some extent the market today is showing characteristics of a mad crowd so we have to be careful.”
Last year Mr Woodford spoke out about the threat from Ed Miliband, the Labour leader, to freeze energy prices. He said: “I do worry about the anti-business environment that seems to prevail in the western economies at the moment particularly in Europe and indeed in the UK.”
He added: “The energy companies have been demonised by the media and by politicians and completely inappropriately. I wouldn’t support them as paragons of virtue but they are an essential part of the economy. “Without power and sufficient reserve power the economy is going to fall over. Frankly, the amount of new investment in energy infrastructure is worryingly low.”
Mr Woodford, who will in two weeks launch an investment trust in two weeks, Woodford Patient Capital, focused on “early stage” companies, also underlined the importance of immigration for such businesses.
“Immigration has been a fantastic boom for UK science and I think it will continue to be so.” Earlier this week BlackRock, the world’s largest fund manager, warned in a report that markets were too complacent over risks from the election. The Royal Bank of Scotland also argued that “political risks look under-priced”.
telegraph.co.uk
Mr Woodford, who until a year ago worked for Invesco Perpetual managing fund portfolios worth £33bn, said the election would have an unprecedented impact on share prices. In a wide-ranging interview with The Daily Telegraph, he also raised concerns about a growing “anti-business” culture and the threat posed to industries such as energy.
He made his comments in a week when business shifted to the centre of the election debate. A coalition of more than 100 senior business figures warned in a letter to the Telegraph that a Labour government would “threaten jobs and deter investment”.
Mr Woodford said previous elections had mostly been “pretty unimportant for stock markets and equity asset prices particularly in the UK. I think now we’re in a slightly different place, given the political uncertainty and given the influence that fringe parties are going to have.”
Forecasters predict a hung parliament on May 7 with both the Conservatives and Labour unlikely to be able to form a stable coalition. Even if an agreement is reached, Mr Woodford fears it would fall apart before its statutory five-year term, with uncertainty blighting investor confidence in the intervening years.
Other factors, such as the prospect of a referendum on EU membership or a re-run on Scottish independence, would also unsettle investors. - Neil Woodford: 'Some parts of biotech are in a bubble' The warning comes days before the end of the tax year when investors rush to buy stock market Isa funds.
Mr Woodford said: “Can you expect Scotland will be part of the UK if the SNP is supporting a minority Labour administration? What will happen to Britain’s membership of the eurozone? These are big uncertainties that won’t become that much clearer after the election.”
As for sterling, he said it was “in the middle” as the euro weakened because of the European Central Bank’s stimulus measures and failing economic growth, while the dollar’s strength stemmed from America’s recovery and “increasing uncertainty about the world economic order and increasing political uncertainty”. Regardless of the outcome of the election he also raised concerns about valuations.
Mr Woodford, who runs his own company, Woodford Investment Management, was one of the few fund managers to sidestep the dotcom boom and bust in 2000. He said the challenge was to focus on fundamentals and valuations, adding: “To some extent the market today is showing characteristics of a mad crowd so we have to be careful.”
Last year Mr Woodford spoke out about the threat from Ed Miliband, the Labour leader, to freeze energy prices. He said: “I do worry about the anti-business environment that seems to prevail in the western economies at the moment particularly in Europe and indeed in the UK.”
He added: “The energy companies have been demonised by the media and by politicians and completely inappropriately. I wouldn’t support them as paragons of virtue but they are an essential part of the economy. “Without power and sufficient reserve power the economy is going to fall over. Frankly, the amount of new investment in energy infrastructure is worryingly low.”
Mr Woodford, who will in two weeks launch an investment trust in two weeks, Woodford Patient Capital, focused on “early stage” companies, also underlined the importance of immigration for such businesses.
“Immigration has been a fantastic boom for UK science and I think it will continue to be so.” Earlier this week BlackRock, the world’s largest fund manager, warned in a report that markets were too complacent over risks from the election. The Royal Bank of Scotland also argued that “political risks look under-priced”.
telegraph.co.uk
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