Expert notes short-term risk in some areas
TOP stockpicker Ashok Jacob says the downside risks are still greater than any upside as markets lean more towards pricing a softer landing.
Mr Jacob – who was Kerry Packer’s closest confidant for almost a decade and a trusted lieutenant to James Packer – was speaking as he steps back from his role as chief investment officer at Ellerston Capital.
He said the risk reward in global markets was “asymmetric” and if the latest economic cycle had a harder landing than people expected it would hit companies trading on big revenue multiples hard.
“There are some sectors that are very overvalued, like the sort of unprofitable tech space – the businesses that are trading on big revenue multiples and things like that. If you do get a bit of an air pocket, they’ve got again a very asymmetric skew,” Mr Jacob said.
“This new level of interest rates needs to be absorbed by those borrowers, consumers and businesses that are exposed directly and indirectly to higher funding costs, higher capital rates etc for the overall economy to skate through without a hiccup.
“I think everything’s got an OK outlook in the sort of medium-term or long-term but in the short-term, there are some very, very overvalued pockets where there are really opportunities to lose too much money for those who are not prepared for it.”
It is the second time Mr Jacob has stepped down as chief investment officer of Ellerston, which he co-founded two decades ago. The first time was in September 2018 when the fund hired Chris Hall, from BlackRock.
David Keelan will succeed Mr Jacob in the chief investment officer role.