Professional investors anticipate UK equities to experience strong growth over the next year, according to research among wealth managers, financial advisers and financial planners across the UK, commissioned by Rathbones Asset Management.
Overall, 81% of those surveyed expected growth among large and mid-cap UK equities, though sentiment on small caps was mixed.
The FTSE 100 reached a record high in May. Those surveyed believe the market will climb higher, with 56% of those surveyed predicting an increase of between 5-10% over the next year. A quarter anticipate gains of between 10-15% over the next 12 months. A further 16% expected an increase of below 5% while just 2% expected a fall.
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A similar sentiment was recorded on the FTSE 250 Index, with over half predicting a 5-10% increase. However, 22% expect a larger rise of 10-15%. 18% anticipate an increase of 5% or below, while only 3% predicted a fall.
Alexandra Jackson (pictured), Rathbone UK Opportunities fund manager, said: “It’s no surprise that investors are warming up to UK equities again. Low starting valuations and limited ownership are colliding with an improving economy and rapidly falling inflation.
“A noteworthy contrast to the US, where valuations are significantly higher, certain stocks are very crowded, lead indicators are slowing, and inflation looks stickier. The political and economic arguments for avoiding the UK are draining away – by mid-summer we could have a new government and a rate cut – a supportive environment particularly for UK mid-caps.”
However, the picture was more mixed for the FTSE Small Cap index. While sentiment was still positive, with 74% of respondents expecting a rise, 17% think the index will fall and 9% expect little change.
In April, UK funds suffered a net outflow of £1.3bn according to the Investment Association, continuing a similar trend of withdrawals from the region over the last few years.
However, 55% of those questioned believed that outflows will fall, while a further 25% believe flows will turn positive.
The prospects for the UK economy are also underpinned by the belief that UK consumer confidence is set to increase over the next 12 months, with 76% of respondents anticipating a rise in confidence and 19% believing it will remain the same. Just 5% see a fall in UK consumer confidence.
While the US has been the main driver of growth over recent years, the findings indicate that 70% of those surveyed believe UK equity valuations are set to rise versus US equity valuations.
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