Michael Browne, portfolio manager at Legg Mason affiliate Martin Currie covering European long/short, said it has been a shocking year for almost every asset class.
“Something of an Annus horribilis [and] barring a rally late in December it will have fewer ‘up’ months for the UK specifically than any other year since 2008. But, if the world doesn’t fall apart, equities are now very cheap.
“If you look at the UK specifically, a number of areas could bounce very hard in the event of an end to the Brexit turmoil.
“They include housebuilders, as well as some of the mortgage and challenger banks. Uncertainty has weighed particularly hard on the housing market and from the banks’ perspective, if this is resolved it could provide a boost. It could also lead to rate rises in the UK, and a potential lift for sterling, and that rising yield curve could provide banks with a further tailwind.
“Conversely, such an environment would be bad for the hard-hit retailers across not just the UK, but Europe broadly, if rates did indeed go up.
“Looking across broader Europe, we are buying back into hard-hit growth stocks as many have had earnings upgrades but de-rated significantly.”