Walker acknowledges there is an element of political risk associated with utilities, but believes the valuations mostly reflect this.
Steven Andrew, a multi-asset investor at M&G, says one of the characteristics of markets when recessions happen is that investors become less concerned about valuation and focus instead on the reliability of a company’s earnings.
Andrew has in recent times flitted between owning US tech stocks, which are generally regarded as highly valued, and bank shares depending on whether expectations were for interest rates to rise further or not.
But he feels that in a time of economic strife “bank earnings have proven over time to be more volatile, and that is exactly what shareholders don’t want at that time, so the relative cheapness of bank shares won’t be something that investors particularly care about. It is rare in recessions for things that aren’t expensive to do well when we are on the doorstep of a recession. And that may apply to large ”
Andrew also recently began investing in long dated UK government bonds for the first time since 2014, saying the yield, at over 4 per cent on the 30-year maturity, is very attractive right now.
david.thorpe@ft.com
