Despite the recent plunge in the value of sterling against other currencies and an upsurge in inflation, Neil Woodford sees plenty of opportunity ahead for investors holding shares.
He said in a recent blog post that his fund's prospects remain very bright, putting that down to "a good mix of global and domestic exposures in businesses that can deliver sustainable long-term growth, a great balance between high-quality dependable growth companies and earlier-stage businesses with incredible long-term potential."
Inflation? He's not bothered
Mr Woodford reckons inflation could exceed the government's 2% target over the next 12 months, but not by much. I think he's right to look at recent inflation as a short-term phenomenon caused by the sudden devaluation of the pound more than anything else. Shock devaluations in the pound won't keep happening, so it will take other drivers to get ongoing inflation to take root in Britain.
It seems unwise to make macroeconomic predictions though, and even Neil Woodford reckons he doesn't try to forecast precise numbers, instead focusing on the potential future direction of variables such as inflation. If anything, Mr Woodford seems more concerned about the possibility of deflation than that of inflation.
The fall of sterling? We shouldn't worry
Investors shouldn't worry about the fall in the value of sterling against other currencies, Mr Woodford reckons. People are putting the plunge in the pound down to the outcome of the Brexit referendum, but he thinks the pound had it coming anyway. He says in the blog: "The pound has looked overvalued for years when you consider the many imbalances that we've seen building up in the economy for a very long time now."
Although recognising that a weaker pound brings inconvenience for consumers travelling abroad and higher costs for imported goods, he points to the advantages that a devalued currency bring. For example, businesses exporting goods or services become more competitive, because they're cheaper to foreign buyers than they were when the pound was higher.
Mr Woodford does concede that if the pound falls a lot more from where it is today he would take it as a ''worrying sign that the situation is worsening towards a crisis of confidence in the UK." Although he doesn't expect that to happen, he says it would be a "destabilising and unnerving event for investors," which he would use as an opportunity to buy more shares for the long term.
The overriding message
What I'm hearing from Neil Woodford's blog is buy and hold shares in firms with good-quality businesses. Ignore macroeconomic events. If the shares fall, buy more. That's a message I've heard before, from the world's most successful investor Warren Buffett, for example.
So what should I buy? For inspiration, I'd look at what Neil Woodford hold in his funds. One big holding is pharmaceuticals giant GlaxoSmithKline(LSE: GSK), a firm that deals in medicines -- a form of consumer goods that tend to generate reliable flows of incoming cash that can be used to pay steady and rising dividends. Because GlaxoSmithKline's business is affected less by macroeconomic weaknesses than businesses operating in more cyclical sectors, the firm is an ideal candidate for a defensive portfolio. Especially when times are uncertain.
Kevin Godbold has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.