Fund managers’ top ideas for 2018

Europe and emerging markets have been tipped as the regions to watch in 2018 for best returns by managers in a poll by the Association of Investment Companies (AIC).

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Just under a third of managers asked chose Europe as the region they thought would offer the best stock market returns next year, with 23% choosing emerging markets and 14% selecting the US.

A quarter expected companies in the software and computer services sector to perform the best, while 21% opted to back banks, and 13% for financial services.

Overall, most managers (60%) thought equities would fare best in 2018, reflecting similar surveys elsewhere, but the proportion of bullish responses fell from 76% reported in last year’s poll.

Just over 30% said they didn’t know if markets would continue to rise or not with stalled or failed Brexit negotiations posed as one of the biggest risks to the economy.

Annabel Brodie-Smith, communications director at the AIC, said: “While managers are generally positive on the outlook for equities in 2018, it’s revealing that they are more cautious than last year.

“Last year’s concerns focussed on Brexit and it’s the same again this year, with Brexit being the core issue. However, it’s clear that managers are still broadly positive about equities, with Europe becoming their favoured region for 2018 and technology’s star rising to be the most popular sector next year.”

Broad economic growth across the globe was picked as the single biggest reason to be optimistic going into 2018 by 42% of the managers polled.

The same optimism filtered through to UK  stock market expectations, with 64% believing the FTSE 100 will continue to grow in 2018 and end the year between 7,500 and 8,000.

Andrew Bell, chief executive at Witan, said: “Equities are essentially a means of gaining exposure to the fruits from global economic growth so provided that 2018 continues the unexpectedly good and widespread growth experienced in 2017 time should be on the side of those invested in equity markets.

“Continued growth in corporate earnings set beside a very gradual rise in interest rates (as central banks take some pressure off the monetary accelerator) should provide a following wind.”