Advisers quizzed on their expectations for a range of asset classes have picked out unloved UK equities as the second-best prospect.
Of 200 UK based advisers interviewed by Opinium for Aegon’s Adviser Attitudes report, 44% said they expect UK equities to be in the top three performing asset classes in 2024.
This was narrowly behind the top dog, US equities, at 49%. The notable aspect of this is that the rich valuations already being seen in the US market have not heavily dented expectations for the rest of this year.
Emerging market equities came in as the third most favoured asset class with 41% of advisers putting it in their top three.
At the other end of the scale, a hefty 60% of advisers said they expect commercial property to be in the bottom three performing asset classes this year.
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Cash at 36% of respondents and gilts at 28% were the other two least favoured asset classes amongst advisers.
Aegon noted that with 40% of the world going to the polls for elections this year, politics is likely to be playing a role in advisers’ thinking.
Anthony McDonald, head of portfolio management at Aegon, said: “After outperforming for each of the last five years and being at the centre of the technology and AI revolution, US equities seem unstoppable at first sight, and it seems reasonable to expect them to continue leading the market.
“However, on long-term valuation measures they are now expensive, trading at levels only previously seen in the dotcom and post-pandemic bubbles. This feels unsustainable, and it is a key reason why we’re underweight in US equities.
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“In contrast, UK equities look more reasonably valued. We’re particularly positive on smaller companies, which tend to be more sensitive to the domestic economy,” McDonald added. “Undervalued asset classes such as emerging market equities also have the potential to have their time in the sun should political and policy changes influence markets.”
“Conversely, high interest rates are likely to be a headwind and structural post-pandemic changes to our working and consumption habits also represent challenges to established sectors, as well as opportunities elsewhere.”
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