However, like Husselbee, he says the benefit will be broad-based, with consumer-facing companies benefiting from higher levels of discretionary spending, while input and transportation costs will be dramatically lower across a plethora of industries.
Focus on quality
Hughes, meanwhile, is watching Greece with interest. While it is highly likely it will need another bailout this summer, he does not see it creating long-term problems for Europe. In the short term, he says it is likely to create a lot of noise and volatility, and is a factor he is wary of over the coming months.
“Long term, we have the broader issue of the Brexit to consider, the European migration crisis and more fundamentally what is happening on the political side of things,” he says. “However, it is easy to get side-tracked on the issues and forget about the quality companies that are out there.”
As such, with this year looking like it will be more difficult and more volatile, Hughes says the key is to find managers who look very different to the index. “You will not win this year if you simply look to replicate the index or go for index plus one funds,” he says.
“You need managers who are prepared to back their convictions and find the industry champions, as these are the stocks that will be best rewarded, not the companies that just make up large parts of the index.”
