Although UK equities advanced for a third consecutive month
in May, with sectors sensitive to economic expectations,
such as banks, performing well, Ben Wallace, manager of
the new Gartmore UK Absolute Return Fund, is cautious about
stocks building on their recent gains.
"The stock market's strong rally reflects growing
expectations of an economic recovery," said Wallace.
"However, some stocks are pricing in a recovery before
we've had the downturn".
Wallace said that he favours large-cap companies with
genuinely defensive characteristics, such as strong cash
flows, growing and well-covered dividend yields and a strong
element of ‘self-help' that can be used to offset
the impact of weaker demand.
"As the cascade effects of the credit crisis continue
to feed through to unemployment and the broader economy,
the market may find it difficult to advance much further,"
he added. "For us, as investors, it will be important
to stay nimble and flexible."
The Gartmore UK Absolute Return Fund was launched in April
2009 and aims to benefit from both stock and market movements.