Research(1) from Willis Owen amongst nearly 1,000 UK retail investors reveals that 17% expect the UK stock market to fall by over 10% between now and April 2019; 6% anticipate a correction of more than 15%.
|Percentage fall in UK stock market over the next six months
||Percentage of UK retail investors who think it will fall by this much between now and April 2019
|Up to 5%
|Between 5.1% and 10%
|Between 10.1% and 15%
|Between 15.1% and 20%
Of those expecting the UK stock market to fall, 71% cited Brexit as a key reason for this. This is followed by 41% and 37% citing increased political risk or a UK recession respectively.
Due to the uncertainty around Brexit, 42% of UK investors intend to reduce their exposure to UK equities and bonds over the next six months. Furthermore, of those expecting the UK stock market to decline, 25% intend to increase their cash holding, and 21% plan to invest more in overseas stock markets. One in five (20%) also plan to reduce the amount they save and invest on a regular basis.
However, 46% of investors believe that any correction in the UK stock market over the next six months could be an attractive long-term investment opportunity.
Adrian Lowcock, Head of Personal Investing, Willis Owen says:
“Even after the sell-off in markets in October, investors remain nervous of the UK market. Our research reveals Brexit is putting off investors, and this is a dominant trend across both professional and retail investors and is reflected in industry wide data. However, investors should look further ahead when considering their portfolios as the UK presents good value over the longer term.”
For investors looking to invest more in the UK, Willis Owen’s top fund picks are:
Merian UK Smaller Companies
- Merian have one of the most highly regarded small and mid-cap teams, headed by Dan Nickols who is the manager of this fund. Companies must demonstrate one or more of the following characteristics: the ability to grow earnings faster than the market average for an extended period of time; the scope to generate a positive surprise; or the potential to be re-rated relative to the market. A pragmatic approach is taken to valuation, with various ratios and timescales used depending upon the situation. This flexible approach allows growth, value, and recovery names to be held, but the portfolio has tended to show a growth bias.
Man GLG Undervalued Assets
- Henry Dixon and co-manager Jack Barratt believe they can add value through thorough analysis of company balance sheets to understand a company’s true, real-world assets and liabilities. They seek to identify two types of stock: those trading below their estimate of the company’s asset value and those where the company’s profit stream is being undervalued relative to the cost of capital, in their opinion. The portfolio has a value bias relative to peers, but it does steer the managers towards elements of quality and positive earnings momentum. Dixon has demonstrated his ability to consistently execute the investment process with discipline.