Market News

60 seconds on the outlook for equities after the UK election

The period following Brexit is likely to be turbulent for the FTSE but there will be opportunities to buy cheap stocks.

09/06/2017

David Docherty

David Docherty

Fund Manager, UK Equities

Schroders

Initial flight to safety

The initial reaction of the market has been a flight to safety whereby the market has been buying stocks with international earnings.

These stocks have outperformed so far, meaning the FTSE 100 has actually gone up.

In contrast, some of the mid-cap, domestic, cyclical stocks have suffered. This is because the market is concerned the weakness in sterling will impact their margins and also the spending power of their underlying customers.

Could sterling strengthen?

Looking forward, there is a prospect of sterling strengthening at some point, possibly if markets decide that reflation could result from the government loosening the purse strings.

The other thing markets will have to calibrate is to understand better the prospect of a Labour government at some point. In so doing they will need to understand their policy on nationalisation, regulation and other intervention.

Take advantage of volatility

As always with these political events - and we’ve had many of them in the last year or so - what we try to do is to take advantage of market volatility to buy companies trading on cheap valuations

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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