Artemis believes the UK market could be set for a few more flat months before returning to growth. ...
Artemis believes the UK market could be set for a few more flat months before returning to growth.
Derek Stuart, who runs the Artemis Income fund, believes factors such as the continued overvaluation of the technology sector are set to hold the UK market back in the short term and added that the progress of the US economy will be a key influence.
Stuart said: "I still think we will have a short period, when the market goes quite flat until we get the interest rate and inflation scenario really sorted out. People keep saying interest rates have peaked and if they peak at another quarter point I do not think it is really material.
"I think people just want to see how the US economy can be managed down from the sort of 5.5% growth rates to the 3.5% that people forecast then they want to know if that be done without going into recession or is there still an inflation issue.
"I think that will take another three to six months to actually work through the system. I also think we still have a degree of overvaluation from the technology sector but what makes me more comfortable with the UK market at the moment is that we have seen the Nasdaq fall from over 5,000, to 3,000-4,000 and a lot of that over-valuation has been taken out, but there are certain stocks out there that still look massively overvalued."
He added that the UK market is currently trading at fair value, but that institutions overall have around 6% in cash and are looking to invest this.
Stuart said that Artemis uses macro-economic analysis to focus on the sectors where there is the greatest earning momentum.
Within that the group looks at the fundamentals and those stocks that Artemis believes will maximise returns.
He said: "To summarise that philosophy, we recognise that it is not only earnings that affect share prices, there are other factors at work, so we have to understand the ownership of those stocks and sectors.
"So we analyse that, we try to focus on those sectors that combine both the improving earnings prospects and the under ownership so we get the double whammy effect of earnings growth going up plus the re-rating as institutions buy into that sector."
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