Outlook 2010: UK Equities

Outlook 2010: UK Equities
The past year will be remembered for extreme market volatility- few predicted the crash of March when the FTSE hit 3,512, but those who held their nerve would have greatly gained from the subsequent rise to 5,383 in November. We ask the experts- will the UK continue to grow in 2010?

Compiled by Emma Wall
Published: 12:34PM GMT 16 Dec 2009


"The outlook for 2010 is far from certain. The Government has to walk a tightrope between ongoing fiscal and monetary support for the economy and handing over to the private sector again as growth resurfaces.

Too much support could cause inflation to spike upwards and too little could cause the economy to fall back into recession.

Government intervention in markets and the economy has prevented the huge deflation feared at the start of the year. Sentiment has turned positive following an improvement in key leading economic indicators and corporate earnings.

Market direction for 2010 will be determined ultimately by a return of volume growth feeding through into corporate earning. The focus of the portfolio will be upon finding companies capable of growing their profits in an uncertain environment

David Stevenson, founding partner of Cartesian Capital Partners
“Stock selection from here should, therefore, focus on companies that can exhibit sustained sales and earnings growth in a post-stimulus environment.

Although the UK market has been hitting new highs in 2009, there have been recent signs of a change in mix within the overall index. Mid and small cap companies have lost some momentum after significantly outperforming large cap companies for most of 2009.

Having been the focus for risk and recovery appetite amongst investors, the underperformance of mid and small caps may mark the beginning of a broader market dynamic for 2010.

The recent preference for large cap includes many non-cyclical growth companies which have lagged the 2009 rally, and also internationally exposed companies, which are proving more attractive as domestic sentiment struggles under the prospective tightening of government policy.

We will continue to focus on an investment theme of visible earnings, spread across genuine recovery companies and durable growth companies where both are undervalued. The range of sectors involved is likely to be diverse, but with a leaning towards international plays until the UK economic picture becomes clearer.”

David Jane, head of multi-asset M&G
“Sterling and US dollar based assets are likely to suffer due to the risk of further quantitative easing, the indebted state of public finances and the poor economic outlook.

A long period of low UK interest rates and continued money printing from the Bank of England is unlikely to help the pound.

However, my negative view on sterling does not include UK equities, which I am positive on owing to their status as a real asset offering attractive long-term returns as well as the very international nature of the UK stockmarket.

Most FTSE 100 companies are large global blue-chips which generate significant revenue outside the UK and are not dependent on the UK consumer, nor are they overly exposed to the pound’s value falling.”

http://www.telegraph.co.uk/finance/personalfinance/investing/6817247/Outlook-2010-UK-Equities.html