Low valuations bring 2010 double-boost for UK smaller companies

As we enter 2010, one of the greatest unknowns for UK investors is the outcome of the forthcoming election and the extent of the tightening policies thereafter.

The key risk remains a hung parliament, or a major policy error by the newly elected party undoing the good work of the stimulus. However, the odds still back a Tory victory, and it is encouraging to see the detail behind their austerity headlines is promoting smaller government and encouraging economic growth as a solution for the deficit. Evidence suggests the recession might actually have ended in Q3 09, although official revisions may take time to confirm this. Meanwhile, corporate profitability has been impressive even during the trough of the recession due to the prudent reaction o...