The UK equity market will recover from the recent sell-off and many shares are the cheapest they have been for two years, according to Blake Crawford, who jointly runs the £193m JP Morgan UK Dynamic Equity fund.
Mr Crawford said the sell-off in UK and global markets witnessed at the start of February was to be expected, as equity market performance at the end of 2017 and the start of 2018 was unjustified.
He said: “January began much as December had ended, with a sustained rally sweeping across global markets. By mid-January the rise had been so meteoric over the preceding 1.5 months that to carry on at that rate would have implied an annualised performance of 57 per cent for the All-Share.
"Despite the positive newsflow at the corporate level, clearly the market’s rise was a case of too much too fast.”
He said at a time when interest rates are rising, people inevitably look to avoid companies or markets where the levels of debt in the economy are highest, as those businesses would suffer most.
But he added that in the UK, the average level of debt for a listed company is very moderate, and this should protect the valuation of many companies on the UK market.
Guy Monson, chief investment officer at Sarasin, said UK equities could be “a tremendous opportunity” if the UK government agrees a deal with the EU.
He said global fund managers have been withdrawing cash from the UK market as a result of fears about the outcome of the Brexit negotiations, but if a deal is reached he expects UK shares to perform well as international investors return.
Ben Russon, lead manager of the £75m Franklin Templeton UK Opportunities fund, said political uncertainty in the UK extends beyond concerns about the manner of the UK’s exit from the European Union.
He said the potential for the election of Jeremy Corbyn as prime minister could also act as a drag on investor sentiment towards UK assets.
Recent falls in the UK market have created value in areas such as consumer staple stocks, and utilities, h said, parts of the market that have underperformed over the past year and a half, but where shares have now become cheap.
Mr Russon said the value of shares in the house builder sector have also become cheap.
Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, said he has been preparing his client portfolios for higher inflation for more than a year, but that Brexit is not part of his investment thinking.