Dolfin's CIO on why he's positive on Europe and the UK

Expectations of a 'soft Brexit'

Recent moderation in macroeconomic data across Europe, as well as weakness in sterling and euro against the dollar, supports the case for selective positioning in the UK and European equity markets, where we note attractive dividend yield characteristics.

Avoiding ETF or passive positioning on a benchmark level, we prefer stocks in sectors such as financials, basic materials, and energy and consumer (both staples and discretionary) that have high and sustainable dividends, resilience to any downturn in the current macroeconomic backdrop, and have a relatively low correlation to FX volatility.  From a macro perspective, we are looking for UK inflation to have peaked and to move sideways (if not slightly lower) from here. We are cautiously optimistic on sterling over the long run, given our expectation for a ‘soft Brexit', but cognisant ...