In a world where investors are betting on stocks tied to economic growth, the U.K. equity market is not the place to be.
According to RBC Wealth Management, British stocks will miss out as traders push equities higher on bets of faster global growth and inflation. That’s because roughly a third of the main British equity gauges are made up of defensive names in the healthcare, consumer goods, utilities and telecommunications sectors that traders tend to perceive as safer investments and scoop up in times of economic turmoil.
Despite global stocks reaching new peaks in recent weeks, firms from JPMorgan Chase & Co. to Natixis SA have recommended that investors stick to the so-called reflation trade, as macroeconomic data will continue to support the stock market. RBC Wealth agrees, noting that the U.K won’t benefit from the trend as much as continental Europe and the U.S. The firm, which oversees roughly $430 billion globally, has an underweight rating on U.K. shares.
Source: Bloomberg (09 March 2017)