Equities prove hot for long-term investors

Equity trades high with execution-only investors but experts advise long-term thinking.

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Many execution-only customers believe current market conditions are presenting buying opportunities and that value can be found in the market, according to Barclays Stockbrokers.

Our survey said…

In a survey of its customers, 40% of respondents believed they could capitalise on current market conditions, with 32% saying developed equities presented the best investment opportunities.

The UK’s largest online execution-only broker has seen unprecedented levels of trading activity as the market reacts to the ongoing turmoil in the US and the eurozone.

“Market events have triggered extreme volatility and we continue to experience exceptional levels of trading activity as our self-directed clients take control of their investment decisions,” said Barclays Stockbrokers head of product Paul Inkster.

“While some investors continue to wait for events to unfold, many others are actively seeking investment opportunities, as evidenced by the majority weighting towards purchases.”

Inkster said developed equities continue to be a popular choice with clients, even as markets fluctuate hugely.

Take care

Looking at the long term, Coutts is another buy-side house seeing equity opportunities in the current market rout but warned investors to be careful.

“Timing any bounce in equities is fraught with danger, so we prefer to adopt a thematic approach,” said Coutts equity strategist James Butterfill. “Market timing is particularly difficult in the current environment, given the considerable hurdles still to be overcome and the potential they have for exacerbating volatility.”

Butterfill expected structurally slower growth in developed markets for the next few years and said he had identified several themes for companies better placed to weather the longer-term effect of the deleveraging process.

Firstly, he said investors could look for larger companies selling to faster growing emerging markets.

“Large companies in the developed world that have a large and growing exposure to revenues from faster growing emerging markets are likely to outperform their domestically-oriented peers,” he said.

Also on Butterfill’s radar were equities with higher dividend yields.

“We expect the deleveraging process to keep interest rates lower for longer, making equities with higher dividend yields look attractive relative to extremely low yields on government bonds and cash deposits,” he said.

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