Fund Managers Warn of Overvalued UK Stocks

Fund managers from Evenlode, Jupiter Asset Management and Franklin Templeton give their views on the UK stock market outlook for 2017

Emma Wall 3 January, 2017 | 10:48AM

All this week, Morningstar.co.uk will be bringing you a Guide to Investment Ideas for 2017; stock picks, market reactions and political forecasts from the investment professionals.

Colin Morton, Franklin UK Equity Income

Many large caps are at the highest valuation levels that I have seen in my career, trading on price-to-earnings ratios that would normally make investors cautious. With alternative sources of returns, such as traditional bonds, looking so unattractive, it is understandable why investor behaviour has driven UK equity valuations higher. For some, these large caps offer perceived safety because of their solid pricing and powerful earnings.

Equally, with these companies able to borrow at historically low interest rates, many seem to be putting their faith in the ability of these large caps to grow their dividends. We are seeing stocks that we would consider reliable cash generators trading at P/E ratios of around 20, which some investors might consider too richly valued in normal conditions, but nonetheless these stocks have been the drivers of overall market returns.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies