Nick Train, the fund manager of Finsbury Growth and Income (FGT), has told investors to be fully invested in equities, warning them to remember that “the economy is not the same as the stock market”.
In his latest podcast, the manager of this investment trust, which is a member of Moneywise’s First 50 Funds for beginners, tackles the question: “Why is it, given that Brexit is seen so potentially damaging for the UK economy, that the UK stock market is going up and up?” And, while, in trademark style, making no predictions about the future, he concludes: “Why shouldn’t it carry on going up?”
“The FTSE 100 is barely higher today than it was 16 years ago in 1999 and early 2000. That’s a long time for a major stock market to go nowhere or to go sideways,” he explains.
“I’m just going to say what I often say on these occasions. Do what we do. Look to be as fully invested in equities as you can and then hang on for the ride.”
“It’s the job of the stock market to be surprising”
He adds: “There is an overlap between the economy and the stock market but it’s a far less deep overlap than most people think. It’s a straightforward category error to think that the domestic macro-economics of the UK can have too much influence on this collection of substantial global international businesses that make up the bulk of the value of the UK stock market. Of course, when sterling falls the value of those global assets, those global earnings, just goes up and up.”
“The second thing to say though is you should never be surprised at how surprising the stock market is and that’s because it is virtually the job of the stock market to be surprising and unpredictable.”
Mr Train goes on to give some interesting observations on three companies in his portfolio gleaned from his research and reading over the summer.
- “In the countries where software company Sage operates there are 70 million small businesses. But only one in every five of those small businesses has any kind of accounting software or takes any sort of software service at all.”
- “Burberry remains among the top 5 luxury brands in the world. It makes the company strategically very attractive.”
- “Pearson has more signed up and paid for subscribers to its digital products than all of its competitors put together.”