Today the Bank of England reported that while business uncertainty has risen, it has yet to see a “sharp general slowing in activity”.
More good news came with UK unemployment falling to 4.9%, an 11-year low.
In a period of massive uncertainty for the UK, the swift appointment of Theresa May as prime minister has certainly had a calming effect on markets and investor confidence.
Still, Mark Burgess, CIO EMEA and global head of equities at Columbia Threadneedle Investments, has instigated a cut in the firm’s equity exposure from overweight to neutral in asset allocation portfolios.
For him, the current rally feels “somewhat unjustified and unsupported by the fundamentals”.
He explains: “There are going to be a number of headwinds facing the UK economy as it detaches itself from the EU over the coming years, which will likely reduce economic activity in the UK and impact domestic profits.
“Moreover, at some stage we are going to have to contemplate the possible impacts on the broader economy of the US election result, while disharmony could yet break out within the European Union.
“We are also mindful of the global debt burden and global overcapacity, and are particularly alert to the alarmingly high levels of non-performing loans in the Italian banking system, as well as China’s ongoing attempts to rebalance its economy.”
Wealth and asset managers often talk of the need to remain cautious in their positioning, but is there a danger too that this in itself has become an overcrowded call?
