Polar Capital's Nick Davis on opportunities in European income

Less scope for markets to get more expensive

Traditional income sectors have lagged over the past year, but we see scope for moves in the bond market to wrong-foot equity investors.

While studying correlations between 10-year bond yields and sector relative performance can provide a tactical view for those closely following indices, it does not in itself make selling a good company or buying a bad company a good investment strategy.  That being said, after several years of falling bond yields justifying multiple re-ratings, we are now in a phase where valuation discipline becomes more important. We see the current market backdrop as favouring neither extremely expensive nor deep value stocks as the punishment given to recent corporate disappointments has shown. ...