Vaccines allow UK assets to catch up

After having been hit particularly hard during the COVID-19 crisis, UK assets are well placed to perform much better now that COVID-19 vaccines are brightening the economic outlook. Indeed, the combination of a decent economic recovery and continued ultra-loose monetary and fiscal policy should be a potent mix for both the FTSE 100 and the pound. We think the FTSE 100 could climb by about 18% from now to 7,500 by the end of next year despite the pound appreciating from $1.34 now to around $1.40. The stronger economic outlook may well push up 10-year gilt yields from 0.30% now. But as we think the Bank of England won’t raise Bank Rate above 0.10% for five years or so, 10-year yields may not rise above 0.50%.   Webinar Invite: Global State of Play Wednesday, 25 November Led by Group Chief Economist Neil Shearing, our senior economists will be holding a briefing on the health of the global economy, including an assessment of current lockdowns, the potential impact of vaccines, and what this all means for financial markets. Complimentary registration here.