, told WealthBriefing on Friday that they have not upgraded their sentiment towards UK equities. “UK equities are cheap, but they deserve to be for several reasons, including the composition of the benchmark, the structural biases imposed on UK pension funds from investing and UK (and European) social and environmental policies that are anti-growth. UK equity, in aggregate, is a value trap,” he said.

European equities
RBC Wealth Management continues to recommend an underweight position in European equities.

According to Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia, European equities have markedly lagged the S&P 500 Index over the past six months, owing to the sharp deterioration in the region’s relative economic momentum.

“The main culprits for this backdrop are softening global demand for Europe’s manufactured goods, particularly in China, and the European Central Bank’s aggressive interest rate hiking cycle. Moreover, compared to other regions, the MSCI Europe ex UK Index has lower exposure to growth stocks, and to technology stocks in particular, which have outperformed in recent months amid the surge in interest around artificial intelligence,” Carrier said in a note on Friday.

Following their bout of underperformance, she thinks European equities have a particularly attractive valuation, both in a historical context and relative to the US. Even taking into account differences in sector exposure, the MSCI Europe ex UK Index trades at a historical discount to the S&P 500.

Carrier continues to recommend an underweight position in European equities as she thinks weakening macro and earnings' momentum will remain headwinds to the region’s ability to outperform. Economic momentum has stalled since the spring, but this does not appear to be fully reflected in earnings' expectations. Given the more muted economic environment, she thinks consensus earnings' forecasts are at risk of being downgraded.

Against this backdrop, Carrier would remain selective: “For the patient investor, some attractive opportunities may be emerging in sectors which have sold off heavily, such as luxury stocks that suffered due to their China exposure.”

Carrier's views have been echoed by Mathieu Racheter, head of equity strategy research at Swiss private bank , who favours US over European equities, with a focus on quality growth names coupled with some defensive plays. See more here.