Advisers divided over UK equities amid Brexit uncertainty

Advisers are split over the prospects for UK equities, a survey from Aegon shows, with a quarter of respondents believing they will generate the best return for their clients in the medium to long term and another quarter viewing them as the most overvalued asset class.

The survey results reflect the opinions of 151 advisers who were either questioned before or after the general election this year.

The advisers who were positive about UK equities focused on the exposure of UK companies to global markets and the potential for an improving situation as Brexit negotiations continue.

Those who were cautious were concerned about recent falls in Sterling and the potential for a market correction with ongoing Brexit uncertainty.

The research asked advisers about the most attractive and most overvalued asset classes. Beyond UK equities, 22 per cent of advisers believe emerging markets will generate the best return over the medium to long term.

A fifth of advisers showed their confidence in European equities, arguing the asset class will generate the best return for their clients over a three to five year investment period, compared with just 6 per cent four months earlier. Just 2 per cent of advisers said European equities were the most overvalued class.

After UK equities, those surveyed said gilts were the second most overvalued asset class, citing high valuations that have been buoyed by a prolonged period of quantitative easing.

Just under one fifth (18 per cent) of respondents said US equities were the most over-valued asset class, an improvement from 38 per cent four months ago.

Aegon UK investment director Nick Dixon says: “There’s a clear split among advisers on the medium-term prospects for UK equities. For our part, we remain overweight to this asset class in our core and select portfolios, which are managed in conjunction with Morningstar.”

Dixon adds: “While many developed asset classes look overvalued at present, UK equities feel better value on a relative basis. Market fundamentals remain broadly unchanged following the vote to leave the EU, despite speculative activity and the recent fall in sterling.”