Equity overweights in UK and Europe will benefit over the next 12 months

The sharp fall in shares in the first half of the year has drawn us to gradually reduce heavy cash p...

The sharp fall in shares in the first half of the year has drawn us to gradually reduce heavy cash positions and we are now once again overweight equities. The rationale is one of valuation. Value-based strategies have suffered badly from mid-2007 but the divergence in sector multiples suggest a turning point might not be far away. Consensus profit forecasts are still too high but, even on trimmed estimates, stocks are between 20%-30% cheaper against bonds and cash depending on the region. Low, and in some cases negative, real rates should provide a liquidity support which will be bolster...