Over the last 12 months the asset classes have delivered returns of 12.5% and 15.5% respectively*** and were the strongest performers of all the major asset classes included in the survey.
By contrast, advisers are least optimistic on the prospects for cash, commercial property, gilts and corporate bonds.
The findings suggest a return of market confidence from advisers after a historically volatile year, which saw equity markets in particular plunge by 30% in the initial stages of global coronavirus restrictions*. Direct commercial property funds in particular were badly impacted, with many announcing that trading had suspended during the spring. This is likely to have impacted the negative feeling around property fund prospects.
Commenting on the findings Richard Whitehall, Head of Portfolio Management at Aegon, and manager of the Risk-Managed Portfolios, said: “Over the last 12 months US equities have performed well, driven to a large extent by the performance of a relatively small number of technology stocks that have shrugged off, or in some cases benefitted from the changes in consumer behaviour brought on by the pandemic. Likewise, emerging market equities have by and large performed well, particularly Chinese equities where economic activity has bounced back quickly following the initial coronavirus contraction.
“The relative value of these markets has however become less attractive over the course of the year and the markets are now richly valued. As such, advisers should be wary about expecting the current trends to continue. In our view the greatest potential for returns next year comes from UK and Japanese equities, which underperformed on a relative basis in recent months, but which now look undervalued relative to historic norms.
“Looking to 2021, the outcome of the finely poised Brexit negotiations will be one of the most significant macro-economic factors influencing the UK and European economies. The outcome will either create a healthy bounce in the economic outlook, or will become a factor that weighs on investor sentiment.
“With Joe Biden entering the White House next year his ability to deliver fiscal stimulus, as well as his view on issues such as corporate tax, international trade and the US’ relationship with China will be significant.
“Lastly, the wave of optimism that met the news of coronavirus vaccinations could be challenged as it becomes clear how quickly it can be rolled out on a mass basis, but overall this is a positive development for economic growth. The prospect of something like a return to life as we knew it now seems in sight, but only time will tell whether it is effective in slowing transmissions and whether it can be delivered in sufficient quantities.”
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