Mott: FTSE will seesaw between 5,000 and 5,600 for years

PSigma’s Bill Mott has shaped his portfolio for a multi-year period of anaemic growth, which will see markets seesaw as investors switch between risk on and risk off trades.

Mott, who heads up the group's £452m Income fund, said the FTSE 100 will be range-bound between 5,000 and 5,600 points, as the economy rebalances.

He forecasts a 60% chance that growth will be sluggish for a number of years with UK growth standing at around 1%.

Mott joined other critics of the Office for Budget Responsibilities' growth forecasts for 2013 and 2014, at 2.1% and 2.7%, saying they are too optimistic.

"Our central scenario is there will be a multi-year period of anaemic growth. To achieve the government's re-balancing act growth will inevitably be low," said Mott.

"The economy will resemble a blocked nose for the next couple of years and has reached an inflection point, at which growth will be subdued at best.

"In this environment the FTSE 100 will drift sideways, between 5,000 and 5,600 for a number of years, unless the European Central Bank galvanises the market by purchasing eurobonds - which will see the market jump up to the 6,000 level."

Mott added he foresees a 20% chance the UK economy will face a deflationary environment, while also putting a 20% number on the prospect of growth beating expectations and inflation rising.

He also reiterated his view the pharmaceutical sector, in which he has a 19% position, will be significantly re-rated in a sluggish growth environment.

"Pharmaceutical stocks are positioned similarly to where tobacco was a decade ago - they are being priced like they will never come up with any new drugs. They will substantially re-rate in a sideways market," said Mott.

"Even if the share price does not get the re-rating it deserves, with the average yields between 4.5-6% you are getting an attractive level of income."

Mott's defensive stance over the past year has seen his fund's performance pick up and is back in the top quartile over one year.

The PSigma Income fund has returned 3.3% over one year, beating the IMA UK Equity Income sector average, which has lost 1%, according to Morningstar.