Dan Kemp, who jointly runs the managed portfolio service at Morningstar, said he expects returns from UK equities to be 15 times higher than those of the US in 2018.
Despite the continued political and economic uncertainty in the UK, Mr Kemp said valuations are the key driver of investment returns, and on that basis he calculates UK equities will return 4.6 per cent compared with 0.3 per cent for those of the US, representing approximately a 15-fold difference.
On fixed income, Mr Kemp said he finds “most bonds to be unattractive investments” right now, and would rather hold cash.
Those bonds in which he is invested tend to be emerging market debt, where he said he expects returns to be in the region of 2.4 per cent this year, compared with a negative return of 2.1 per cent for UK government bonds.
Ben Yearsley, a director at Shore Financial Planning, noted the UK was the best performing equity market globally in April, returning 6.8 per cent.
He said a spate of merger and acquisition activity (M&A) was the key driver.
Of the longer term prospects for the market Mr Yearsley said there has been a wide valuation discrepancy in the UK markets for a while with UK domestic stocks looking cheap.
"With a weak-ish currency its surprising overseas companies haven’t snapped more up. Is this the start of an M&A boom?
"Interestingly sterling has staged somewhat of a recovery over the last six months post the Brexit referendum lows, but still looks cheap on a global basis.”
Scott McKenzie, who runs the £3m TB Saracen UK Equity Income fund said the negativity towards the UK market is the result of fears around the outcome of the Brexit negotiations, and such a negative scenario may not occur.
David.Thorpe@ft.com
