The past three months have seen the worst quarterly return for UK equities for almost six years, according to Threadneedle.

Research from Threadneedle showed that since the start of the year, the FTSE All-Share Index has fallen by 11%. Rebecca Chesworth, equity investment specialist at Threadneedle, said that new lows were reached on 21 January, when negative sentiment in financial markets prompted an emergency rate cut by the US Federal Reserve.

“Much of 2008’s first quarter was spooked by credit markets, while towards the end of the quarter, the market swung wildly on the near collapse of Bear Sterns, and the ensuing rescue offer. The Federal Reserve’s action since then has signalled its intention to prevent the failure of a major institution and has helped to restore calm to the credit markets,” she said.

In addition, Chesworth said the sub-prime saga is far from over. She added: “We can expect rumours about the health of investment banks and hedge funds to continue, and corporate defaults to rise.

“We have not identified the turning point yet, but are certainly looking for it. Meanwhile, we remain positive over the longer term, seeing support from attractive valuations, particularly dividend yields, and the financial health of UK plc.”