Which sectors and asset classes should investors buy to the reap the rewards of today's election result - and which ones should they avoid?
WINNERS
Overseas earners
FTSE 100 companies deriving significant revenues from abroad have had a decent tailwind from the weaker pound since Britain’s vote for Brexit, and fund managers suggest this trend will continue.
Ryan Hughes, head of fund selection at AJ Bell: “Sterling has weakened as investors move away from the currency and this can be positive for some investments. Those investors who have exposure to overseas equities will have seen this last year following the Brexit outcome and closer to home, with the FTSE 100 Index being so reliant on overseas earners, this may be a place to look for returns.”
Nancy Curtin, CIO of Close Brothers Asset Management: “At this early stage, the balance of factors looks less supportive for domestic UK equities. In contrast, large cap UK equities, with earnings overseas, should continue to benefit from the currency boost to earnings provided by a weaker pound. This is where most of our exposure lies.
“Going into the election, we have been positioned underweight UK equities, with a bias within our allocation to overseas-exposed corporates. We will be evaluating the situation as it evolves. Times of uncertainty can create interesting stock specific opportunities as pockets of value often emerge. As multi asset class investors, our portfolios have broad exposure to global companies, many of which can continue to benefit from improved global growth and earnings expectations that have little to do with UK politics.”
Property and housebuilders
The housing market was a hot topic in election campaigning, and whoever ends up in charge will no doubt want to make sure it remains buoyant, while a weaker pound will entice more overseas investors to buy up expensive London property.
Adrian Lowcock, investment director, Architas: “Falls in the value of the pound could potentially be good for overseas investors into certain parts of the UK property market, especially London and larger UK cities which may lead to more overseas money chasing the market. This could also mean that there is a likelihood of potential rate rises moving further out which ought to be good for property in the short and medium term - lower financing costs and property continues to be attractive when compared to lower yielding cash and gilts.”
Old Mutual Global Investors’ head of equities Richard Buxton says he remains positive on the prospects for housebuilders in an environment of anti-austerity.
“At a sector level, we remain relatively optimistic on the prospects for the listed housebuilders. The most significant potential impediment to the sector’s continued progress had appeared to be a discontinuation of the Help-to-Buy scheme, of which there was no mention in the Conservative manifesto. As we enter an era of increasing anti-austerity, the scheme’s survival prospects may now improve.”
