Church House Investments’ joint CIO James Mahon has said beleaguered UK equities may be at a turning point.
In his latest market commentary note, Mahon (pictured) pointed out that most leading equities markets sold-off in April, though the UK was the exception in being up over the month.
“Having been bombarded with data recently as to the huge weight of selling of UK equities in favour of moving international, I am tempted to think that this might be a turning point, UK equities certainly do look cheap in an international context,” he said.
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“A chart of the UK data equivalent to the S&P 500 data above would show the FTSE All-Share earnings yield, which is close to 7%, markedly higher than the two-year Gilt at 4.4%. Time to be a shade contrarian.”
Mahon also weighed in on the crucial matter of central bank policy.
“Our last note in this series at the end of February spoke of the narrative for the central banks, and US Federal Reserve in particular, shifting to more of a wait-and-see mode from December’s expectation of multiple rate cuts for the year ahead,” he said.
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“US employment data has remained firm since, and their inflation data has been on the uncomfortable side of expectations, so the Fed has switched from ‘three rate cuts this year’ back to hold.”
He added that the position is “a lot less clear” for the other central banks. “It does still appear likely that the European Central Bank will proceed with a first cut in June while the Bank of England probably should do, assuming the May and June inflation figures are as benign as expected.” Mahon said.
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