In UK stocks, the market has chucked us a bone – we should grab it

UK stocks are trading at their biggest discount to global equities in 40 years. You should probably be looking to buy, says Merryn Somerset Webb.

Everyone wants the same thing out of an equity investment: the kind of long-term sustainable earnings growth that eventually turns into long-term income. The problem is that if everyone wants the same thing, that thing is rarely cheap. But every now and then the markets chuck us a bone in the form of a group of perfectly good stocks going cheap. Right now the UK might be such a bone.

UK stocks are trading at their biggest discount to global equities in 40 years. This is partly to do with the composition of the market (lots of banks) but possibly more to do with the disappearance of international investors fed up with the confusions of Brexit. So the general expectation is that if a deal appears, the market might rise. If not, it will not. Leaving aside that there is no longer any such thing as no deal (lots of side deals have already been made) we wonder if this is really so. Perhaps what matters more than the final decision is just that one is made – that all these years of uncertainty come to an end (or at least are perceived as having come to an end). Markets like certainty (in most cases) so deal or no deal, once we know, the UK market might well rise regardless.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.