The Brexit gloom is overdone

Despite worries over Brexit, British stocks look to be on a firm footing.

887-next-634

Next: the British fashion retailer is worth a look

British stocks "can't seem to catch a break", say Lisa Pham and Aleksandra Gjorgievska on Bloomberg. The FTSE 100 is down about 7% for the year, while UK indices trailed their major US and European counterparts throughout 2017 too. Short-selling activity on the FTSE 350 index hasn't been this high since 2009.

The UK is the least popular region among international institutional investors, notes the Financial Times. Even among British investors, home stockmarkets were the ones people felt least confident about, according to Hargreaves Lansdown.

Political uncertainty is keeping people away, with little clarity so far on what Brexit will mean for the economy. While most of the FTSE 100 is focused on the global economy the index's constituents make 70% of their sales overseas domestically focused firms have taken a beating.

But the concern looks overblown, notes Annabelle Williams in The Times. According to Michael Clark, who runs Fidelity's Moneybuilder Dividend fund, average price-earnings ratios for domestically focused stocks are 15% lower than for exporters. "This is unwarranted."

Uncertainty is one thing, but that kind of discount suggests a very poor economic backdrop, which appears unlikely. "The fundamentals of the UK are reasonably sound." Growth may have been revised down, but it has not vanished.

The labour market is solid and supporting consumption. Some solid firms are on sale, says Clark:"Get in... and buy." Along with Richard Buxton of the Old Mutual UK Alpha fund, Clark tips Lloyds, Legal & General, Aviva, Next, Whitbread and Pets at Home as attractively priced and therefore worthy of further research.

Recommended

What makes up the price of a litre of petrol?
Budget

What makes up the price of a litre of petrol?

The cost of filling the average car with fuel is falling. Here’s what makes up the price of a litre of petrol.
1 Jun 2023
Will energy prices fall 2023?
Personal finance

Will energy prices fall 2023?

Falls in wholesale energy prices have fed through into a lower energy price cap, but will that continue?
25 May 2023
UK inflation slides to 8.7% - what does it mean for your money?
Economy

UK inflation slides to 8.7% - what does it mean for your money?

Inflation has dropped below 10% for the first time in months, but with food prices at a 45-year high, is this good news and what does it mean for your…
24 May 2023
What is inflation and how will it affect you?
Inflation

What is inflation and how will it affect you?

ONS is set to announce the latest inflation figures this week with experts suggesting we may finally see it slide. We look at what lower inflation mea…
23 May 2023

Most Popular

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?
Savings

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?

Two fortunate NS&I Premium Bond winners are now millionaires. Find out here if you’re one of them.
1 Jun 2023
3 renewable energy stocks to buy
Investments

3 renewable energy stocks to buy

These stocks look poised to benefit as the world transitions to a net zero economy.
31 May 2023
Housing slowdown ‘deeper than anticipated’ as property sales slump
House prices

Housing slowdown ‘deeper than anticipated’ as property sales slump

New data from HMRC shows a fall in property sales - now experts predict a delay to the housing recovery
1 Jun 2023