Caution is warranted as valuations look stretched

ON UK INCOME

Liontrust's James Inglis-Jones explains why the UK market looks expensive.

The UK market does not look particularly cheap. As equities have made further progress over the course of the last six months, valuations based on long-term average earnings and the replacement value of assets have begun to look more stretched. While, in the short term, valuation is a poor guide to market direction, over the medium to long term, some caution may be warranted. Valuation levels highlight the attractions of yield-based strategies with their emphasis on yield as a source of return, as opposed to capital growth. In addition, there is evidence in the post-recovery phase yield ...