Although value is increasingly scarce in UK equities, building and airline sectors remain favourable, says Standard Life Investments.
In the Q2 Global Outlook report, Standard Life said the combination of cheap mortgages and supportive supply and demand dynamics continue to fuel the UK building sector.
Standard Life investment director of UK equities Thomas Moore said: “While the positives are now well-rehearsed and the sector has performed strongly, there is still value to be found.”
“Additionally, input cost pressures for housebuilders are falling, owing to sharp falls in commodity prices in recent months and a levelling out of wages,” he said.
Cheap fuel costs are also benefiting UK low-cost airlines.
“Amid cheaper fuel costs, new competition is springing up for low-cost airlines,” Mr Moore said.
“The low price of jet fuel is allowing airline companies to expand their profitability.
“Traffic volumes and pricing are also healthy, since cheaper household fuel and food bills encourage greater discretionary spending among consumers.
“As operational costs continue to fall, marginally profitable operators that previously struggled for survival, when fuel was expensive, now find themselves thriving.”
According to Standard Life chief economist Jeremy Lawson, the “preconditions” needed to support economic growth are evident in the UK.
“The unemployment rate continues to fall, real wage growth has finally turned positive, and the employment-to-population ratio is now at its highest level since 2008,” Mr Lawson said.
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