Newton UK equities manager Ben Russon is seeking opportunities in non-cyclical parts of the UK equity market and is steering clear of financials and stocks with domestic consumer exposure.
At a Newton global outlook for 2010 round table in London last week, Russon shrugged off the recent bounce in financial stocks in the market, saying that it was the sector bouncing back from the brink of bankruptcy rather than the start of the next secular bull run.
He said bank profitability would remain under pressure for many years in an environment of low interest rates and credit would remain constrained. This, coupled with regulatory pressure, is likely to result in more capital-raisings, lower returns and more break-ups and changes in the corporate structures of financial institutions.
Russon said: “This demonstrates why we do not see an awful lot of opportunities in the UK financial sector. We are not out of the woods yet in terms of economic recovery. There are many stocks from the UK equity market pricing a much rosier economic environment than we think is lik- ely to emerge.”
Head of distribution Paul Feeney said the firm’s defensive stance would stand them in good stead, whatever recovery shape emerged. He said: “If it is a V-shaped recovery, we will do very well, we just maybe will not do quite as well as some of the guys who put their bets on the very high beta, less-capitalised companies.”