London’s FTSE 100 blue-chip index is within a whisker of its all-time high, and a couple of brokers suggest it might soon pass the milestone and move into new territory over the next few weeks.
JP Morgan sees the UK and Japan as its two favourite strategy picks at the moment, driven largely by the down move in bid yields, which favours defensive sectors.
Over the past few months, utilities, real estate, healthcare and staples have emerged as among the top sectors in the US and Europe. This trend is set to continue, said the US bank.
“Stylewise, lower yields could help growth stabilize again vs value, but earnings relative of growth could be peaking, and the concentration risk remains extreme.
“Further, in June we reversed our longstanding preference for large vs small caps; we reiterate this change and believe small caps are attractive on a one- to two-year time horizon.
“At the market level, we looked for the consolidation through summer, on slowing activity, lower yields and the risk of concentration unwind.”
Regionally, the US is the best-performing market year to date, while among international equities it is Japan and UK that are ahead, with the Eurozone and emerging markets behind.
“We believe this type of leadership will continue among International equities, we keep overweight Japan and UK, at the expense of Eurozone and EM.”
Peel Hunt, meanwhile, said that a “mood change” across the UK should feed through to better earnings and growing investor confidence over the coming years.
“Whereas the story for 2022 and most of 2023 was less growth and more inflation, the story for 2024 so far is more growth and less inflation,” analysts wrote.