“We are not in the business of gambling with our client’s money, so until such time as we can predict forward earnings, dividends and asset values with more accuracy, we will be reluctant to allocate new money to equities. That time will surely return, but right now we are still in a very vicious downgrade cycle, which is showing little sign of bottoming,” Mark Holden, an investment manager at the London-based firm, said.

Mr Holden said recent analysis by Deutsche Bank showed that for the S&P 500 index of US stocks, the average trough for bear markets dating back to the year 1900 equates to a current day value of 500 points. The S&P index finished the first quarter of this year at 797, and having touched 666 during the quarter. Simplistically, that implies that the S&P could theoretically fall 300 more points, or more than a third from here, before this bear market matches the average, he said.

“If you want to be positive, you would argue that governments and central banks have reacted aggressively and early enough to shock the economy back into life with massive monetary easing. Many believe that they will be successful in their endeavours,” Mr Holden said.

He continued: “There are only two major assets that tend to benefit from inflation, gold and equities…we are in fact of the opinion that deflation is far more likely than inflation given the enormous de-leveraging that has to take place. We believe that in fact all QE will do, is to mitigate, rather than solve the problems in the short term.”

“The trouble is that this ‘de-leveraging’ could take many years. With unemployment rapidly accelerating around the world, for now we see little chance of a sustained recovery and consequently, we continue to avoid equities and where we do own them, we remain very defensively positioned,” he said.

Vestra is “very favourably inclined” to gold, since it can perform both as a hedge against inflation and benefit if currencies weaken in a still-deflationary climate.