UK equity sentiment at ‘most positive level’

Adviser sentiment towards European and UK equities has hit its most positive ever level in a survey compiled by a major fund management group.

A total of 91 per cent of respondents to the Barings Investment Barometer said they were either ‘very’ or ‘quite’ favourable towards European equities – the highest rate since the poll began in 2010 and up from 63 per cent 12 months ago.

UK equities also appeared popular with 93 per cent of respondents saying they were favourable to domestic stocks – up from 79 per cent last year.

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The number of intermediaries ‘very’ favourable towards European equities has increased sharply to 39 per cent from 18 per cent a year ago and 4 per cent two years ago. The number of intermediaries that are ‘very’ favourable towards UK equities has increased to 40 per cent from 29 per cent and 13 per cent, respectively.

The highly positive sentiment towards European equities comes as the number of IFAs that believe eurozone growth problems will be the biggest global macroeconomic challenge has declined, to just under half (47 per cent) from 71 per cent in the first quarter of 2013.

A total of 59 per cent of advisers highlighted the biggest global macroeconomic challenge as the inability of overleveraged companies to reduce debt.

The third most significant challenge cited by respondents was a continued slowdown in growth in China with slightly more than a third (35 per cent) of IFAs believing this will be the biggest threat to investment growth in the next six months, down significantly, however, from more than half (55 per cent) in the previous survey.

Rod Aldridge, head of UK wholesale distribution at Barings, said: “In Europe, Barings expects to see continued support for asset prices in 2014 and equities to outperform bonds as the economic recovery continues.

“The UK is likely to be one of the strongest economies next year, with growth likely to be towards the 3 per cent level, in our view.”

In spite of the recent fall in UK inflation (CPI) to 2 per cent as at December 2013, more than three quarters (78 per cent) of intermediaries believed the UK would experience rising inflation during the next three years.

Just 4 per cent believe the UK will suffer from deflation or disinflation.

A significant majority (85 per cent) reported that clients were still concerned about the effect that inflation would have on their cash investments, up year on year from 80 per cent.