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.
But whatever happens, there are UK stocks you should probably be looking at anyway. As Max King notes in our cover story this week, an awful lot of our companies have been all but destroyed by our government’s rolling lockdown policies. Not all will survive. But those that do could be very interesting indeed. If post-lockdown there are fewer holiday companies than before, lack of competition will make the ones remaining not just survivors, but winners. The same goes for hospitality firms, cinemas, airlines and possibly even retailers. Which are which?
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Note that MoneyWeek contributors Max King and Cris Sholto Heaton are interested in the oil majors. I am too. Some investors refuse to hold them for environmental reasons. This is a mistake. They are cheap and will throw off cash for many decades. Right now, listed as they are on public markets, they are heavily scrutinised and held publicly accountable. If they stay this cheap for much longer, that might change. There’s an awful lot of private cash out there that cares less about these things than you think you do – and could remove them from public markets. Don’t allow a sense of do-goodery to stop you from looking at miners either. As James McKeigue points out, you can’t have a green new deal (or an electric car market boom) without a good few very large copper mines.
On the subject of avoiding investments for moral reasons, China might not be your political cup of tea (for good reason). But it’s the only major global economy likely to end this year with a higher GDP than it started it with. It is also rather more than the low-quality goods exporter too many still think of it as. Think tech powerhouse. You can’t ignore this market – but you can invest in it via a fund manager who focuses on the behaviour of individual companies rather than governments. More on this in our latest podcast.
Finally, don’t forget the small stuff. Watch your domestic bills (working from home means heating at home) and don’t get fleeced on pension fees. There’s no point investing well if you waste the proceeds.
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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.
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