**Clive Beagles and James Lowen** Senior Fund Managers
The aims and direction of monetary policy have reversed. We are in the opening months of a regime-shift. Investors will need to radically re-think their asset allocation.
The skew to growth in recent years has been very powerful. There was a logic to it when the cost of capital was zero or even negative. But that time is already gone. Future capital will come with a cost and investors need to think of a commensurate cash return, in other words, dividends.
UK valuations are low relative to their own history and to other markets. The people buying the market are private equity funds, who see the value on offer. The other people buying UK equities are companies. All the major banks are buying back shares, as are many other firms.
A key characteristic of the UK equity market is the amount it generates in dividends, in live cash flows. In recent years, the quality of the dividend yield has improved, falling as a proportion of total earnings.
Future capital will come with a cost and investors need to think of a commensurate cash return, in other words, dividends.
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