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ON UK GROWTH

The market clearly faces some significant challenges in 2012. We anticipate that, at least in the short-term, newsflow on the European debt crisis will continue to be the key driver of investor sentiment.

However, the stock market does not simply reflect the state of the economy. Investors with long memories will remember equity markets are capable of rising during difficult economic times. We believe this is likely to be the case in the years ahead. Our optimism is based on a number of factors. Valuations are attractive. With a price-to-earnings ratio of 10.2 times 2012 earnings, the market is cheap relative to history and competing assets and arguably already reflects a significant slowing in earnings momentum.  The UK P/E ratio is also attractive relative to the other major equity m...