Head of UK equities and manager of the UK equity alpha income fund Leigh Harrison says things have been making progress but it will be hard to maintain and a cautious stance is still appropriate.
Harrison says: “We have come a long way in a short space of time, but that move has been fuelled largely by relief that the authorities have managed to prevent complete meltdown in the financial system.
“The Bank of England’s special liquidity scheme is helping to resolve some of the debt and liquidity problems in the banking sector, but we are still concerned about the economic outlook. We expect the data to continue to deteriorate over the coming months, with poor readings likely on house prices, employment and retail sales.”
He says this will ultimately have a knock-on effect on corporate earnings, with earnings expectations still being too high, especially in consumer-related areas such as retail and leisure, as wage increases will be limited and the effects of inflation are even more apparent.
But he is keen to stress the opportunities in the current climate.
He says: “We are in for a difficult period in the economy and, with the stock market having had a decent bounce in April, further progress may be harder to come by. Nevertheless, in volatile market conditions there will be clear opportunities for long-term investors to buy good quality growth franchises at attractive prices. This is what we will be doing for our clients.”