FTSE 100 stands out as the best option among equity markets even after a good start to the year, according to the analysts at JPMorgan.
“UK equities are beating global this year by 9% in US$ terms and even if one fully takes out Energy and Mining," the bank said in a note.
“We think there is more to go."
JP Morgan reversed a six-year cautious stance on the UK market in November when it upgraded its view to 'overweight'.
Worries about the UK economy and consumer spending were the main arguments against its change of heart, but the bank still sees UK equities as relatively independent of the domestic economy.
And the elements behind its decision five months ago such as big prior underperformance and very attractive valuations remain in place, it said.
“UK is trading near record cheap vs other markets, even when excluding Value components."
FTSE 100 also has the highest dividend yield among the key regions, it noted, aiding its total return prospects, and is lower beta, which could help it outperform in a range of macro scenarios.
“The key attraction in our view is that the UK equity market offers one of the best hedges with respect to the potential continued repricing of bond yields.
“After all, UK equities never benefitted from the asset reflation trade in the first place.”
In November, JPM said a good way to play its theme was to combine the FTSE100 with a short on the FTSE250.
That "still looks a good trade" it said, with any weakness in the pound also helpful for exporters rather than domestic names.
A straightforward way to invest in the FTSE 100 is to buy one of the many tracking instruments available.
Two of the largest ETFs are iShares Core FTSE 100 UCITS ETF (ISFU) and Vanguard FTSE 100 UCITS ETF (VUKE).
HSBC has an FTSE 250 tracker ETF with the ticker HMCX.