How do UK equity valuations compare to global equities?

Small and mid-cap companies looking attractive

We see grounds for cautious optimism about the prospects for UK equities, particularly in the small and mid-cap arena, according to Eustace Santa Barbara, co-manager of the Marlborough Special Situations fund.

There is little sign of low interest rates ending soon. This is allowing households to service their debts and simultaneously buoying consumer spending. Furthermore, corporates whose balance sheets are now much repaired can invest in their businesses, undertake acquisition activity, or engage in earnings-enhancing activities such as share buybacks. From an asset allocation perspective, equities appear attractive relative to bonds. More than 30% of developed economy sovereign bonds now yield less than zero, while even lending the Japanese government money for ten years will lock in a n...