Investment Outlook (January 2015)
We enter 2015 with the UK equity market in ‘risk off’ mode with oil and commodity stocks continuing to fall on concerns over global growth particularly in China and the Eurozone. Together with concerns over Russia, ISIS and other geopolitical issues, as we sadly recently saw in Paris, it is easy to feel bearish. Bouts of volatility, which have become part of modern day investing, will remain.
At R C Brown we continue to see areas of value and expect a busy period for corporate activity where we will continue to be offered attractive entry points for a variety of good quality companies. The lower oil price will aid GDP growth as consumers stand to benefit from cheaper energy. A strong dollar bodes well for those UK companies paying dollar dividends and there were signs in 2014 of a pick up in M&A activity which underpins valuations.
Much has been written about the general election in May which is expected to be close and may result in another minority/coalition government. Any volatility on the back of this we expect to be short lived and offer a potential buying opportunity. A UK equity yield of 3.4% remains attractive compared with other asset classes.