In focus
per cent, and Invesco Perpetual
Select UK Equity, both of which have
a large-cap focus. While there has
been a small resurgence in “value”
equities since September of last year,
it has not been enough to boost Alex
Wright’s Fidelity trust to date.
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“Investors across the globe
are underweight and that
becomes a ‘pain trade’ if
markets move higher”
Elliott agrees: “Despite the
bounce in the UK market over the
last few months, the consensus of
Mood swings
the fund managers who invest in
From here, it is difficult to judge
this area seems to be valuations
the mood. Investors who waited for
remain modest and expectations
any certainty on Brexit would have
are for higher M&A activity in 2020.
missed the bounce and may now be
Multiples remain unchallenging by
wondering whether UK equities can
historical standards, while we believe
sustain their strength in the face of a that yields are attractive in a low
year of uncertain negotiations ahead. interest-rate environment.”
The UK government has already
irritated its most important trading
Not so fast
partner, the US, by using Huawei for
Nevertheless, it is not all plain
parts of the 5G network and there
sailing. Becket points out that
are likely to be plenty of highs and
corporate profits still look lacklustre:
lows before the final trade deals are
“The UK market has had no profits
completed. Equally, investors may
growth in the last five years. That’s
wonder whether valuations no longer not abnormal compared with
look compelling after such a bounce. international peers, but it gives pause
However, Tom Becket, chief
for thought. The Bank of England will
investment officer at Psigma, believes help things and there is now talk of a
there is still plenty of value left: “The
rate-cut. International fund flows will
UK still looks cheaper than most
continue and we also see lots more
markets. It could be a value trap, but
M&A activity in the year ahead.”
I believe we will see international
Should investors conclude there
investors move back. Interest has
is still recovery potential in UK
picked up across equity and credit
equities, a question mark remains
markets. Investors across the globe
over the right type of trust to pick.
are underweight and that becomes a
‘pain trade’ if markets move higher.”
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