The short-term outlook for the FTSE is bleak but investors who have been selling their UK equity funds may be acting with undue haste, according to Ben Seager-Scott, head of multi-asset funds at Tilney.
Mr Seager-Scott said: “I think the near-term outlook remains challenged, but people are too quick to write off the long-term (so I wouldn’t be too bearish).
"Both the UK market and the UK economy (which one needs to remember have quite a different make-up) are naturally pretty cyclical, so have clearly suffered during the Covid-19 crisis with markets priced accordingly.”
A market that is more cyclical is one which has more companies that do well when the wider economy is doing well, and less well when the wider economy is struggling.
The FTSE 100 has many companies in the banking, mining, oil and retail sectors, which are cyclical.
Mr Seager-Scott added: “Whilst I think we are getting towards the bottoming-out and turning point that would mark the start of a new economic cycle, we are still likely to have to go through a painful but necessary period of creative destruction characterised by rising unemployment and business failures.
"The UK market could well outperform when we do have sustained global economic recovery, but that is looking a little way off.
"At a portfolio level, we’ve got our UK equity exposure at effectively a ‘neutral’ level while focussing on those funds investing in high quality companies where returns are not predicated on a rapid return to economic growth.”
david.thorpe@ft.com
