Time to bet against excessive pessimism

Just as directors’ dealings often reveal more about the immediate outlook for their companies’ shares than can be gleaned from annual reports, it often makes sense to follow what fund managers do, rather than what they say. So it was a pleasant surprise over lunch the other day to find myself in step with one of the most successful investors alive in Britain today. Anthony Bolton, president of investments at Fidelity, the biggest unit trust manager in the world, is buying shares again, two years after he called the top of the bull market.

This should give comfort — and pause for thought — to the herd who are dumping stocks and share-based funds in favour of cash or guaranteed returns. Rattled by the collapse of banks and equity indices on both sides of the Atlantic, the risk-averse are seeking security at almost any price, pushing bond yields even lower and causing the most competitive deposit offerings to be withdrawn or curtailed.

Northern Rock, which can be regarded as being as secure as the British government which owns it, has scrapped its best deals. The Post Office, which enjoyed soaring receipts after word got round that its Bank of Ireland-administered deposits are covered by the Irish government’s unlimited guarantee, may not be far behind. NatWest and RBS report that the number of accounts being opened has doubled in the last fortnight and they have taken on 140 extra staff at their call centres to cope with demand.

But Anthony Bolton reckons that is not the way to bet. His opinions are worth more than most people’s because he managed the £2.4 billion Fidelity Special Situations fund for 28 years, during which time an investment of £1,000 in it would have grown to £147,000.