While UK equities performed well in the second quarter 2014 and in July to date, investors should be cautious on the sustainability of the UK economic recovery.
Along with Norway, the UK country constituent in the Russell Developed Europe Index was the strongest performing developed Europe constituent market in July, returning 0.5% on the index as of 8 July.
This follows on from the UK country constituent’s performance in the second quarter, when it returned 4.3% and outpaced the 3.9% return of the Russell Developed Europe Index.
However, despite its recent strong performance versus its developed market peers in Europe, Russell believes the recovery that is driving this positive performance is potentially not as sustainable as recent economic data suggests.
“Recent UK GDP growth has been driven by less substantial measures such as consumer spending out of savings and rising housing prices and is still trying to transition to fundamental factors such as spending out of wage growth and business investment,” Sturkenboom commented.
