UK equity valuations face four main challenges in 2017 according to Invesco’s Head of UK Equities Mark Barnett. He thinks bottom-up opportunities for the long-term investor have started to emerge and remaining vigilant about valuation is the most important discipline in 2017.
It is likely that the near-term outlook for the UK equity market will continue to be dictated by the movement of global bond prices and the sterling/US dollar exchange rate. These asset markets have exerted a major influence on UK equities over the course of 2016. The strong performance of the bond market — which, unusually, has been accompanied by a rising equity market — and the perceived benefit from the drop in sterling have been the driving forces behind the ongoing re-rating of UK equities.