Buxton: FTSE will struggle to break through 6,000 'for years'

Schroders' Richard Buxton has warned investors the chances of the FTSE 100 breaking through the 6,000 level in the next three to five years is remote.

The head of UK equities and manager of the group's £2.5bn UK Alpha Plus fund said the blue chip index is likely to trade sideways for years as austerity in the UK and the eurozone debt crisis play out.

Speaking at the Cofunds Investment Forum this morning, he said: "If you look at very long term historic UK stockmarket returns, the average is 6% per annum. However, this tends to come from a few years of great returns and then 10 or 20 years of sideways trading," he said.

"Clearly with the ongoing debt crisis we are going to see subdued growth. I cannot say we are going to see another 10 years of this but the prospect of breaking through 6,000 is remote. I think we are possibly stuck in this sideways churning for three to five years until there is a material change in the outlook."

The FTSE 100 is currently trading around 5,500. The last time it was above 6,000 was back in July when it hit a peak of 6,055.

However, he does not think the FTSE will fall below 5,000 as the index has tended to "springboard" from this point.

The manager said the only solution to Europe's sovereign debt crisis is QE and, although he has never been a fan of the euro, he thinks a break up of the single currency will be avoided.

"I have always been a big euro sceptic and I do think it will eventually break apart but not now - that time will be several years down the road," he said.

"The scale of cross-border banking exposure is too great. If anyone were to leave we would have to nationalise the whole European banking system."

Instead, he said more bank write-offs and a move to greater fiscal union, as well as QE, will help the eurozone.

"A European recession is pretty much baked in the cake. US banks started de-leveraging three years ago - European banks have not started yet. The ECB will have to massively print money.

"I know the Germans hate it but QE is the only 'buy-time' solution."

Buxton remains one of the best performers in the UK All Companies sector despite the turmoil seen in markets this year.

Over three months he has delivered 1.6% to investors, versus an average loss of 0.8%, according to Morningstar.

Over longer time periods he has also outperformed, returning 61% in the last three years, compared to an average return of 42.1%.