Even if the current sentiment in markets shifts in the years ahead, there is no reason to have significantly more invested in UK equities, according to David Jane, who runs a range of four multi-asset funds at Premier Miton investors.
Mr Jane said he presently has very little exposure to UK equities as the market is “a bunch of international companies in underperforming sectors.”
The FTSE 100 contains many companies which have business models that are being called into question as society adapts to the world of Covid; these include old companies, bricks and mortar retailers and banks.
Markets are also presently pricing in very little chance of higher inflation, while oil, mining and banking stocks tend to perform best when inflation is rising.
But Mr Jane said that even if market sentiment changes, and buyers begin to look to those equities which offer protection against inflation, this would not necessarily mean UK equities would come back into favour.
He said: “In my opinion the circumstances where it reverses are: an accelerating global economy; rising bond yields; risk on markets.
"All three need to apply and then you would get a reflationary trade like 2016/17. This would not be confined to the UK so you wouldn’t need to just pick amongst the global value/cyclical stocks in the UK .
"We are more than happy to change portfolios materially when needed but we generally await a clear signal rather than try to guess in advance.”
david.thorpe@ft.com
