Columbia Threadneedle's Colwell cautions on UK banks

Favours pharmaceuticals instead

Market consensus has quickly focused on buying reflation, US dollars and financials, funded by selling off any bond proxies, but we would argue this is far too simplistic.

We remain wary that markets have come a long way since the crisis, and are now navigating the later part of the cycle. Recent reflation expectations have led to a broad-based sell-off in bond proxies.  However, we still believe that diversified portfolios can benefit from exposure to companies that offer defensive, reliable growth and deliver steadily growing dividends, funded by underlying cashflows and appropriate debt levels.  Pharmaceuticals have been sold down as bond proxies, but we remain happy with our big positions in this sector.  We stay cautious on banks. Bad debts are ...