The Investment Case for UK Equities Following Brexit

Brexit is looming and rates are rising, creating uncertainty in the UK market. But speculation and volatility are friends to a valuation-driven investor

Tanguy De Lauzon 5 December, 2017 | 3:42PM

UK investors are being forced to contemplate some incredibly difficult decisions. With Brexit a major fundamental risk to the economic and equity market outlook, nervousness is taking hold and outflows are mounting.

This comes at a sensitive time as the Bank of England recently voted 7-2 to raise interest rates for the first time in 10 years. The question is whether this is more likely to reflect a contrarian opportunity or a justified concern.

Speculation and volatility are friends to a valuation-driven investor. Without them, contrarian opportunities cease to exist. We also know that speculation is typically driven by an emotional response, often misjudged and to the detriment of good intentions. For this reason, a rational investor should be trained to view fear as opportunity to capitalise on overreactions to risk.

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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

Tanguy De Lauzon  is Head of Capital Markets & Asset Allocation for Morningstar Investment Management EMEA

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