New year hangover?

Can UK equities continue their recovery into 2011? Paul Farrow finds positive sentiment despite the storm clouds on the horizon

What the experts think 2011 holds for equities

“I’ve got no idea what evidence people have to predict a bubble bursting in China because we haven’t seen a bubble developing yet. I know you might find that hard to believe but the Chinese stock market is still a fair bit below what it was at its high a couple of years back, and on any valuation basis you won’t find any evidence of bubbles bursting or other scary monsters.

“We’ve been hoping for a little correction just to get a bit of common sense back into expectations for equities and it may well still happen over the next couple of weeks. But we believe this is a time to embrace equities, not only in emerging markets and the Far-East, but in other places including the UK and, surprise surprise, the US.” Alan Steel, Alan Steel Asset Management

“Equities are good value relative to their own history and cheap relative to most other asset classes.Additionally they are supported by attractive yields and strong balance sheets in most sectors.Over a five-year plus view I would not hesitate in putting equities first above bonds, property and other major assets.

“However, we all have too many recent reminders that if volatility remains high so perhaps investors can learn to right-size their equity exposure to match their risk tolerance. Focus on the long-term, have the courage to buy more into any dips and in the meantime enjoy the yield premium while you wait. Has the easy money been made?Yes in terms of recovery stocks and cycle sectors, no in terms of quality winners in more sustainable areas of the economy.”Robert Burdett, Thames River