UK shares now offer long-term value, despite the continued market volatility and investor nervousness, according to Govett Investments.
The company says that although all the major UK equity indices – the FTSE All-Share, FTSE 100, 250 and Small Cap – fell during the third quarter of this year the UK economy has remained resilient and could grow through consumer and Government spending.
But although Govett believes that the UK has moved back into fair value, it does not consider valuations to be cheap.
Chief investment officer John Murray says: “The notional real yield on UK equities is nearing what, historically, would have been regarded as very reasonable levels. While equity markets may be volatile for some time, we are urging investors to give UK stocks another look.”
Murray believes the Government has scope for further spending on public services and infrastructure and he predicts that house price inflation will continue to be a positive driver of the economy, provided interest rates remain low.
He also does not believe the pound is overvalued relative to other currencies and says the UK remains one of the best-performing economies in 2002 compared with other Organisation for Economic Co-operation & Development countries.
He says: “We see a strong likelihood of markets rising towards the end of the year-end, up both six months and one year from now. But concerns over a double-dip recession and possible conflict in the Gulf mean UK markets may decline before any rise.”