60 seconds with Matt Hudson on the recent rotation in UK equities

It’s been a fascinating time to be a UK equities investor. For the first quarter in many we have seen a complete rotation in what is driving the market.

Having been in a period when growth, growth defensives and consumer cyclicals have performed really well, we have seen a rally in value and an underperformance in growth.

Opportunities in industrial cyclicals and financials

This is partly because emerging markets have begun to stabilise and commodity prices are going up. We think there is a great opportunity - a short term opportunity - to increase weightings to industrial cyclicals as we get a restocking bounce and also, even in the slowdown phase, to financials.

We think financials are at a big discount to fair value to the market and to other value type assets. However, we are still in the slowdown phase and we must make sure that our overall portfolio positioning remains fairly defensive.

Positive dividend growth

Corporate profitability has already peaked and we have seen signs of stretch on corporate balance sheets and capital ratings coming through as well. From an income perspective, we still see positive dividend growth coming from the UK market this year although levels of cover have reduced.


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