This is particularly significant at a time when market volatility has been exacerbated by significant price moves in a narrow US tech-driven market.
We feel there are positives to take from this recent market volatility. If investor sentiment and capital allocation were perhaps to drift away from the mega-cap tech names, the UK market could stand to be a beneficiary, particularly at a time where generous and reliable dividend-paying companies are looking increasingly more attractive in the context of global markets.
Where to next for UK equities?
As we look ahead to the latter half of this year, what can we anticipate for the UK listed market? We are increasingly hearing international investors speaking about the turning of the tide in the UK.
According to flow data from Bank of America, since May institutional customers have switched from being net sellers of UK equities to net buyers. Perhaps this is early indication that greater stability has encouraged investors to commit capital for the long term to the UK equity market.
Encouraging fund flows into UK assets will be crucial to sustaining this improvement and supporting stronger economic growth.
While sentiment might require that for some investors to act the October Budget needs to be in the rear-view mirror, we are firm believers that the UK market is already attractively priced.
The double whammy for investors is the opportunity to invest in a market that is cheap on a relative basis at the same time as potentially offering a more stable range of future outcomes than other regions.
On a relative basis, perhaps boring could be bullish for the UK equity market as we move through the last part of this year.
Michael Stiasny is head of UK equities at M&G Investments
