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Scope to grow amid low expectations

Schroders head of UK equities Richard Buxton says domestic and consumer-related sectors could provide “tremendous opportunities” to make money despite headwinds facing the economy.

At a Schroders election briefing in London, Buxton said low expectations in the stockmarket create scope for positive surprise. He said: “The UK economy is still likely to lag other economies in this global V-shaped recovery but expectations are so low in the stockmarket for the domestic and consumer-related sectors that is an area where I think there are tremendous opportunities to make money.”

Buxton said the market reaction to the gilt market will have a crucial effect on the equity markets and said an “early and aggressive” app –
roach to tackle the deficit would be supportive. He did not anticipate a doomsday scenario of substantially higher bond yields as yields are likely to remain in line with nominal GDP of around 4 per cent for the next few years.

He said the political recognition that economic growth is vital to cut the deficit would encourage business-friendly policies and huge incentives for corporates to stay in the UK.

Schroders head of European and UK interest rate strategies David Scammell said a Conservative victory would be a marginally better result for the gilt market but scarce information on policies suggests there is not a great difference in cuts between the parties.

Schroders UK chief economist Keith Wade said the most likely election outcome would be a Labour/Liberal Democrat coalition which is where there is greatest confidence in policies. He said: “I think we will end up with a change of Labour leader and probably Clegg and Cable both in the Cabinet.”

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