Future market rallies will be connected with the price of oil, Santander's Richard Moore has said.
A top City fund manager has offered mixed news for Britain's small investors.
Richard Moore, who invests on behalf of the Santander UK Growth Fund, said that he believes the UK economy is proving relatively "resilient", although beset by problems. He cited high oil prices as the key to rising inflation, which in turn is currently having the biggest single impact on the global stock markets.
However, he suggested that high energy costs might be a critical factor in future stock rallies, and, with shares currently trading at comparatively low prices, this could potentially that investors could reap significant rewards over months to come.
The fund manager's own reputation has been enhanced by his investment strategy in the credit crunch, as he moved quickly to reduce the fund's exposure to financial shares - which subsequently dropped rapidly in value - with the onset of the crisis last summer. Some banks are now currently trading at share values just ten to 20 percent of the levels they attained last year.
Mr Moore commented: "The UK economy appears to be more resilient [than the US], but…inflation has now replaced the credit crunch as the key factor in determining market prospects, and this remains driven by the oil price."
He added: "Equities are now trading at comparable levels to the trough of the 1990-1992 recession…This has lead to a short term rally in heavily oversold stock but we believe that the oil price will remain high, and this will remain critical to any future stock market rally. [However] in the meantime, we expect markets to trade sideways to downwards."
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