The Morning Interview: Dollar revival put on hold, says AAA-rated Jane

An expected dollar rally during 2008 will be put on hold as the Fed aggressively cuts rates, David Jane, manager of the M&G Cautious Multi Asset fund has predicted.

‘Everyone is worried about inflation and that the US has devalued dollar – the key will be to keep it down,’ said Citywire AAA-rated Jane.

‘If you read what Bernanke has written, he focuses on periods of history where the US did not do right things and Japan where they didn’t cut rates far or quick enough.’

Despite all hands being thrown to the pumps on interest rates, he recommended ‘wet weather gear all round’ for the markets and said they were ‘not out of the woods yet’.

‘The extraordinary growth of recent years – largely due to huge leverage in the US – has come to an end but has produced this great growth in the east,’ said Jane.

‘We are starting to see that the US slowdown affects global growth. We need to worry about that and what we do about that. Materials indices are weakening and gold is rising.’

Over the next year he said that he was favouring mega-cap equities, some leveraged loan products and government-issued bonds, all with an emphasis on developed markets.

He added that defensive trading was currently very expensive but that there were still opportunities in agriculture, resources and in particular oil.

Having trimmed his exposure in the fund earlier in the year he said that he expected to take advantage of opportunity buys to restore property to its ‘natural level’ of 10% by 2009.

Jane said the fund had undershot his original expectations following a difficult year for the sector, returning 1.22% on investment versus an IMA Cautious Managed Sector average of -0.1%