UK Election reaction from Richard Colwell, Head of UK Equities, Columbia Threadneedle Investments

Trying to rise above the gloom, clearly the result of the UK election is not what the market expected. But it’s worth remembering that the initial market reaction post the EU referendum and US election proved short-lived. A number of stocks that could be vulnerable under a more interventionist government have been weak for some time (eg transport and utilities), so this isn’t coming from a clear blue sky. Any sell-off in media and leisure stocks could prompt takeovers. However, if pressure on Sterling continues and the currency returns to the lower end of its recent trading range, dollar earnings for multi-nationals listed in the UK will be boosted. Remember the UK stock market is much less reliant on the domestic economy than in previous cycles.

In addition, the UK market has been out of favour with international investors for some time. Asset allocation to UK equities is already as low as it was in 2008 at the height of the banking crisis, so there is no sense of hot money leaving the market. The valuation gap with other equity markets, notably the US but also Europe, is as pronounced as it’s been for a decade on several metrics.

So lots of uncertainties and the domestic political and economic path forward is murky. However for UK equities the outlook is more measured and we will be looking for selective buying opportunities.

ValueSpectrum.com News Wire & Equity Research: +31 084-0032-842
news@valuespectrum.com

Copyright analist.nl B.V.
All rights reserved. Any redistribution, duplication or archiving prohibited. analist.nl doesn't warrant the accuracy of any News Content provided and shall not be liable for any errors, inaccuracies or for any actions taken in reliance thereon.