Careful stockpicking needed as optimism points to UK recovery

The rally of recent months has dramatically altered the look of the UK equity market.

However, the optimism spreading through the equity market is only partially matched by the reality of the underlying macroeconomic and corporate environment. OECD economies are likely to remain weak due to lagging unemployment next year, for example. The rebound seen in the UK was fuelled by a further injection of liquidity by the Government, an improving macro backdrop and increasingly positive expectations for the near term. Company earnings results have generally been better than expected and economic survey data has seen improvements. With the third quarter reporting season ...