One of the UK’s best-known hedge fund managers is gearing up for a sharp stock market shock, warning the UK is “destined” for recession.
Crispin Odey, founding partner of Odey Asset Management, says the 30% increase in the FTSE 100 index of the biggest companies listed on the London stock exchange over the past five years is unsustainable. This is because as the FTSE 100’s constituent company earnings have fallen by 80% over the same period.
"What the UK is promising is rising wages, recession, inflation and falling profits. Not exactly the prize that ticket holders in the FTSE and the gilt market have paid up for," says Mr Odey in comments reported by Reuters.
He adds that the pound’s 20% collapse against the dollar in the wake of the EU referendum “mechanically ensures” inflation will surge above 3.5% in the near future. He is calling for the Bank of England to raise interest rates to protect savers.
As of the end of August, his CF Odey Opus Fund held 28% cash, giving him the opportunity to snap up stocks and shares at rock-bottom prices if the markets do plummet.
Mr Odey was one of the few fund managers who successfully anticipated the 2008 stock market crash. His fund delivered 54.8% returns to investors while markets tumbled around him in the year to April 2008, earning him a £28 million pay cheque in the process.