Despite the plethora of Brexit-related unknowns, independent financial advisers are of the opinion that UK equities will produce the best returns for their clients over three to five years.
Of the 102 IFAs who were surveyed by Aegon UK in March, 33% selected UK equities as the asset class that would get the most for their clients.
After UK equities, advisers favoured emerging markets equities for returns over the mid to long-term.
Twenty percent said they would generate the best returns for their clients, further reflecting the current proclivity for risk.
There was a huge drop off between the long-term return generating potential of equities and bonds for respondents.
Only 1% of advisers viewed corporate bonds and gilts as capable of delivering the best return for clients within the time frame.
Property also only received the backing of 1% of advisers.
However, developed equities appeared more over valued to respondents than fixed income investments or alternatives.
US equities
US equities were the most overvalued according to 38% of advisers.
Aegon investment director Nick Dixon pointed out this is “a sentiment backed by high price to earnings ratios, a strong dollar and – to quote Warren Buffet’s favourite valuation measure – a market cap to GDP ratio that’s nearing heights last seen in the US shortly before the Dotcom bubble of 2000.”
UK equities were the second most over valued (16%), followed by gilts (11%) and corporate bonds (9%).
But despite advisers’ willingness to take on more risk, Dixon said his own team was stocking up on cash because valuations are still too high.
