Most overvalued asset class?

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More than a quarter (27%) of financial advisers believe UK equities will generate the best returns for their clients over three to five years, yet a further 24% believe they are the most overvalued asset class, research by Aegon has found.

Those who were positive about the asset class focused on economic fundamentals, exposure of UK companies to global markets and the potential for a positive Brexit outcome.

In contrast, those who felt the opposite expressed concerns about recent Stirling falls and the potential for a market correction in light of ongoing Brexit uncertainty.

The research surveyed 102 advisers in June about their views on the most attractive and most overvalued asset classes.

It found emerging markets were also popular with advisers, with almost a quarter (22%) believing they would generate the best returns over the medium to long-term, spurred by low valuations relative to developed markets and strong growth potential from global demand.

Advisers also signalled confidence in European equities, with one in five (20%) believing the asset class would generate the best returns for their clients over three to five years. A mere 2% of respondents saw the asset class as the most overvalued.

Meanwhile, advisers thought the second most overvalued asset class after UK equities was gilts, highlighted by 20% of those surveyed, followed by US equities.

Investment director Nick Dixon said Aegon would remain"overweight" in UK equities:"While many developed asset classes look overvalued at present, UK equities feel better value on a relative basis. Market fundamentals remain broadly unchanged following the vote to leave the EU, despite speculative activity and the recent fall in Sterling."

He added:"For those that can invest in the medium to long-term the UK market remains attractive, as any short-term uncertainty caused by the nature of future trade deals with the European Union will only partially impact large cap companies, who are more likely to trade internationally."

Informed Choice IFA Martin Bamford however felt less positive about the asset class, saying UK equities looked"expensive" and pointing out the market was "long overdue a correction."

"If we have a messy Brexit, it might be the trigger that takes a bit of the exuberance out of the current market conditions," he added.

Earlier this year Professional Adviser found advisers were opting for a more global outlook in clients' investment portfolios as Article 50 was triggered. 

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This article was written by Hannah Godfrey from Professional Adviser and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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