His view is that earnings forecasts are too rosy when compared to what is happening with GDP growth. Assuming GDP continues to weaken, then history suggests earnings will weaken, however the opposite is being priced into the market.
He attributes this to being a reaction to the fall in the New Zealand dollar, and the fact that the domestic economy is holding up "better than thought."
Elliffe says that merger and acquisition (M&A) activity is a big factor in the market's performance and AMP Capital has benefited from this.
He says more M&A will take place, and that AMP Capital has done some work in this area identifying and buying stocks which could end up being takeover targets.
While he wouldn't name any, he said there were a number of them in the portfolio.
His warning though is that "timing (of M&A activity) is impossible to predict."
Elliffe says there appears to be a lot of offshore buyers looking to acquire New Zealand companies - assuming there are willing sellers.
He summation of the New Zealand sharemarket is: "We don't think there's a great fundamental case for the market, but we think there's a good demand and supply case."
"We are not bearish. We think that the case for recession is weak. The one thing that will cause a domestic recession is a global recession.
Returns over the past quarter have been unusual in that low risk portfolios have outperformed higher risk ones. AMP Capital head of fixed interest Grant Hassell says that this is the first time this has happened since the first quarter of 2005.
However, on a 12-month performance basis the trend is reversed and there have been some very strong performance numbers.
Most notably AMP's strategic New Zealand share fund and global shares portfolio have produced returns of 29.77% and 33.76%.
Hassell says poor June quarter numbers are a reminder that there is often a correction after a big run up in asset prices.
"Don't panic. Fundamentals are still in place for good returns from global equities going forward."
He says there is good value based on earnings and on-going global growth.
The key changes it has made to its asset allocation positions, versus benchmark are that it has taken 2% out of New Zealand fixed interest and put it into global bonds. The reasoning here is that New Zealand bonds are over-valued.
AMP Capital has also reduced its underweight position in New Zealand shares from 2% to 1%.
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