Speaking publically for the first time since his shock move from Schroders earlier this year, the venerable stock picker urged investors to “use any dips as an opportunity to buy” with UK PLC in much better shape than official statistics suggests.
While the current “tapering torment” may increase volatility in the short term, he asserted equities can rise alongside bond yields if gradual and supported by economic data.
He said: “It’s not the case that if bonds are weak then equities have to collapse. There’s a very popular perception that the equity market has entirely been levered by QE and the moment that is taken away we collapse. I don’t think that’s true.”
“Valuations in the UK market are absolutely fine at around 12x earnings, with the long-term average at 14x, but we need earnings growth to be delivered, and I think that will happen.”
While a rally up to 6,800 points reached earlier this year is likely to be the ceiling for the FTSE 100 in 2013, Buxton is forecasting a trading range of between 6,500 and 7,300 in 2014.
This conviction stems in part from a belief that ONS GDP figures are “materially misleading” and backwards looking.
“To my mind, there’s been quite a sharp acceleration from the middle of 2011 in employment and in hours worked that have not been matched by GDP, which suggests to me that GDP is stronger than statistics suggest,” he remarked, adding the economy should grow from “modestly to more than modestly”.
However, looking globally, Buxton remains concerned about emerging market subsidies on domestic fuel prices, which he says remain unsustainable and could have a marked impact on oil prices in the longer term.