By Claire Milhench
LONDON (Reuters) - The equity market is only in the "foothills" of another technology bubble rather than at the peak, Royal London Asset Management (RLAM) said on Wednesday.
Its head of multi-asset Trevor Greetham also said a managed Chinese slowdown could be positive for stocks.
Greetham, who manages the asset allocation for some 50 billion pounds of life and pension funds, also told the 2018 Reuters Global Investment Outlook Summit that sterling faced a big two-way risk on Brexit, and he was not ruling out a reversal on Brexit.
Greetham is currently overweight equities taking the view that although Chinese growth could slow next year, keeping a lid on inflation, developed markets were likely to stay strong.
"That China slowdown, as long as it's managed, is something which is actually quite positive for the risk story, keeps the equity market running and reminds me of the 1990s, where we saw strong growth and falling commodity prices," he said.
"We are in the foothills of another tech bubble rather than at the peak of it."
Global equities (MIWD00000PUS) are up 17 percent so far this year, hitting record highs. Technology stocks have helped fuel this rally, with the S&P 500 tech sector (SPLRCT) up almost 37 percent year-to-date.
But Greetham said that although things looked "a little hot" in this sector, it was not yet as "ridiculous" as the 1990s.
"Bitcoin is the only thing at the moment that to me looks like dotcoms," he said.
On sterling, he said the currency faced big two-way risks given the binary outcomes around Brexit. "Rarely has there been the degree of uncertainty around sterling that we see today," he said.
His sterling position is currently not far off neutral versus the different benchmarks with which he operates.
"If sterling volatility starts to pick up ... we reduce sterling exposure, and when volatility comes down again we close that position. So we're trading between slightly underweight and more underweight depending on the volatility picture."
If Britain leaves the European Union with no deal agreed, Greetham said there could be another referendum-style shock, with a potential 10-15 percent downside for sterling.
But his biggest outside risk for 2018 was a commodity-led inflationary shock. "(It) could come through a big upside growth surprise in China, it could come through a supply problem in the Middle East. So the Saudi situation is something we're monitoring," he said.