The highly unusual nature of the economic recession and recovery means there are likely to be a number of “bubbles burst” in the coming years, according to Simon King, chief investment officer at Vermeer Partners.
Speaking on the latest edition of the FTAdviser podcast, King said: “We are at a very different starting point as we move out of a period of recession and into a period of tapering and interest rate rises.
"It is not normally the case that valuations across different asset classes are where they are now when the recovery starts.
"This means there are going to be many bubbles that burst, we don't know which ones yet, or precisely when it will happen, but it will happen."
Simon Edelsten, global equity fund manager at Artemis who was also speaking on the podcast, said: “We had a period where the stocks that would normally be expected to recover in a recovery did so.
"But the odd thing that is happening now is that we are getting the higher inflation about 18 months into the recovery phase, which is much sooner than normal.
"So now as equity investors we have to judge how much recovery we will have, and how soon it will come to an end, much sooner than is typically the case."
Steven Bell, chief economist at BMO Global Asset Management, said: “The recession and the recovery were both very sharp, the speed of the recovery in company earnings certainly caught people out.”
To listen to the full podcast, click on the link above.
david.thorpe@ft.com