What does the roadmap out of lockdown mean for your investments?

interactive investor names the sectors, shares and funds that could prosper.

The light at the end of the Covid tunnel edged nearer yesterday following the announcement of a roadmap to cautiously ease lockdown restrictions by the Prime Minister.

All lockdown restrictions on social contact could be lifted by 21 June at the earliest if certain conditions are met - such as the vaccine roll-out going to plan. But what does the route to a lockdown free Britain mean for your investments?

Richard Hunter, Head of Markets, interactive investor, says: “The light at the end of the tunnel is becoming brighter, even if the full effects of the eased restrictions may not be felt until summer rather than spring. This in turn puts extra focus on the Budget next week, as the government continues to prop up individuals and businesses as required.

“Despite the cautious roadmap unveiled yesterday, the immediate beneficiaries have been both currency and sector based. Sterling has again strengthened against the US dollar, while the airline, tourism and hotel sectors have seen something of relief rally. Top of the FTSE 100 leaderboard are the beleaguered airline and airline-related stocks International Consolidated Airlines (LSE:IAG) and Rolls-Royce (LSE:RR.), while InterContinental Hotels (LSE:IHG), Whitbread (LSE:WTB) and Primark owner Associated British Foods (LSE:ABF) have all made notable gains.

“This could yet add further fuel to a recovering UK market, which could be slowly returning to favour with international investors as it returns from the wilderness.”

Teodor Dilov, Fund Analyst, interactive investor, says: “The UK market has endured a rough couple of years owing to Brexit uncertainty and, more recently, the global pandemic. But with the announcement of a raft of measures to get society back to the pre-Covid status quo, the UK appears set to stage a comeback and could offer some attractive diversification and potential recovery opportunities in 2021.

Fund ideas

Teodor Dilov, says: “To play the recovery theme, we like R&M UK Recovery, which has well-diversified portfolio of 290 stocks, with approximately one third of its assets featuring in the largest constituents of the UK stock market.

“The nature of the fund is to find quality stocks that have been beaten up by the market. This offers the potential for significant growth should the stocks in the portfolio recover, but investors should expect to encounter a bumpy ride from time to time.

“Hugh Sergeant, who has run the portfolio since its launch in 2008, looks for good businesses that are currently experiencing below-normal profit levels – which are depressing their valuations. To warrant inclusion in the portfolio, a company must have capabilities to help itself out of this predicament. This strategy offers the possibility of long-term capital gains, but its performance profile may deviate significantly from the benchmark FTSE All-Share index.”

“We also like Man GLG Income Professional, which targets a level of income above that of the FTSE All-Share index together with some capital growth. Henry Dixon, who manages the portfolio, runs a multi-cap portfolio with a distinct bias towards smaller UK dividend-payers. The manager adopts a value-based investment approach which results in relatively concentrated portfolio of around 78 holdings.

“Currently the strategy offers an attractive dividend yield of around 5.7% but as it does not own many of the typical names owned by larger income-focused funds, it could experience greater volatility of returns than its competitors. Therefore, this fund may be suitable to complement a core portfolio.”