Michael Browne, portfolio manager for European equities at Legg Mason affiliate Martin Currie: “There has been little or no reported slowdown in enquiries for new houses, and any government will be very keen to at least keep that momentum, if not announcing further measures to help or accelerate building.”
Miton multi-asset fund manager David Jane: “We have a small holding in the housebuilders, where recent slower mortgage approvals and the election have caused prices to weaken short term, and the currently low mortgage rates and wider availability of high loan to value offers mean the background for volume remains favourable.”
Government bonds
The yield on a 10-year gilt has climbed following the election result, but fund managers suggest there are a number of difference forces acting on these bonds, so a more cautious outlook may be prudent longer term.
Mark Burgess, CIO, EMEA and global head of equities, Columbia Threadneedle Investments:
“Gilts have managed to retain their ‘safe-haven’ status through a number of political events in recent years, but non-residents currently hold just under a third of the UK government bond market and any reduction in international investors’ appetite for UK assets would constitute a risk to gilt valuations."
Miton’s David Jane: “We find little attraction in the UK government bond yielding less than 1 per cent, when inflation is over 3 per cent, which means there’s little in the corporate bond market offering a positive real yield either. In this area, we would rather consider the US where yields are materially higher and the era of QE is in the past.”
John Wyn-Evans, head of investment strategy at Investec Wealth & Investment: “There are several conflicting forces acting upon gilts. Government bonds’ safe haven status will tend to be supportive during times of uncertainty, but there is also a risk that the fragility of the government is a disincentive to hold them, particularly for overseas investors.
"The apparent vote against a ‘hard’ Brexit and a second Scottish referendum is more supportive. However, the anti-austerity protest that also seems to be encapsulated in this result would suggest higher deficits and thus a greater supply of bonds, putting some upwards pressure on yields.
“Lack of political certainty and the threat of yet another election might also weigh on economic activity in general, particularly in terms of longer term investment. This would suggest a more benign environment for bonds. As long as the UK remains solvent, government bonds should continue to trade in line with global trends. There is no reason to expect the Bank of England to change its current monetary policy. In fact, the longer the uncertainty, the longer the status quo will persist.”
Adrian Lowcock, investment director, Architas: “Initially gilts may well rise on the news of a hung parliament as the asset class is seen as a safe haven for investors. Longer term though, we remain cautious this year as the willingness of international investors to finance UK debt will be diminished.
