UK - Axa Investment Managers is urging schemes to increase UK equity weightings because it is now cheap enough to deliver returns.
Axa said that although stock market levels have fallen drastically, equity values based on the price earnings ratio show that the asset class represents good value for investors.
Axa Investment Managers senior strategist Nigel Richardson said: “Judging the market on its potential dividend returns, it now offers significantly better value than in recent years. The market is priced such that it has greater availability to deliver excess returns over bonds.”
Richardson expects equities to return 6.25% in the long term due to the dividend yield being at 3.7% and real dividend growth at 2.5%.
Compared to index-linked yields of 2.5%, he said the low price of UK equities offers the best opportunity for gains over real bond yields since the early 1990s.
However, Swiss Life Asset Management disagreed and said that the main markets are still not particularly cheap by international standards and may have to fall further before value is restored.
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