Will UK equities continue to outperform in 2016?

It might seem surprising that the UK stock market has outperformed its peers recently, given the ongoing pressure on commodity prices. After all, the share of firms in commodity sectors is relatively large in the UK. This can mainly be explained by the weakness of sterling. This year, we forecast sterling to depreciate further against the US dollar, although not against the euro and the yen. Meanwhile, we expect commodity prices to recover. Against this backdrop, we think equities in the UK will outperform those in the US, but not those in the euro-zone and Japan.