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.