UK income

UK income hunters face headwinds of historical proportions: 10-year gilt yields hit an all-time low of 0.5% on 12 August, accompanied by a similarly record-breaking feat from sterling corporate bonds of 2.3%.

As we have clearly seen in the UK this year, as equity markets go up, yields go down.

Conflicting forces are buffeting UK equity income investors. Tailwinds include the record low base rate, which is boosting the appeal of dividend income, according to Aviva Investors' James Balfour.

Philip Hammond, the newly appointed Chancellor, has been given an excuse to abandon the concept of austerity and try to address two key issues at the Autumn Statement: housing and infrastructure.

Unlike many other market participants, we do not see a general value rally in the near term. To us, there still remains a lot of value traps, writes Jeremy Lang, manager of the Ardevora UK Income fund.

Focus on high-quality companies

Dividend cuts have been a prominent story for the UK equity income sector over the past 12 months, albeit from fairly high levels in some instances.

The prevailing macroeconomic and thematic backdrop means UK investors are confronted by some difficult choices currently. In this environment, it seems that buying the market is simply not an option.

The UK equity market seems to have taken the view that the biggest losers from a Brexit would primarily be those stocks and sectors that have the highest proportion of domestic earnings, writes Miton's Eric Moore.

A number of commentators correctly highlighted at the start of the year that dividends were at risk in the resources area of the UK equity market, writes Stephen Message, manager of the Old Mutual UK Equity Income fund.