Higher interest rates biggest threat to equities

ON UK INCOME

John McClure, manager of the Unicorn UK Income fund, believes the attention given to budget deficit reduction is obscuring the bigger picture.

The global economy is growing strongly. Consensus forecasts suggest 5% real GDP growth is achievable in 2011. The well-documented performance of China, India and most resource-rich developing countries is now generating export-led growth in Northern Europe and North America. Provided energy prices stabilise at around current levels, we believe the risk to equity valuations lies more in the potential for higher interest rates and bond yields than it does from recession. In the UK, the attention given to budget deficit reduction measures by economists and the media is obscuring this big...