UK stocks finally start to rise – but not as one
The UK Stockmarket recovery is finally getting some traction, says Merryn Somerset Webb. But not all stocks will recover in the same way.
![People on the streets under Christmas lights in 2019](https://cdn.mos.cms.futurecdn.net/eMJBkh3sdecQyrzHc8uW8a-415-80.jpg)
We’ve been telling you that the UK stockmarket looks ridiculously cheap for some time now. We’re finally getting some traction. The FTSE 100 rose more than 12% in November as attention turned to the fact that we are nearer the end of the nightmare of rolling lockdowns (the first Covid-19 vaccines will roll out in the UK next week) – and possibly to the end of the relentless negativity around the type of trade deal we end up making with the EU.
Even the analysts at Goldman Sachs are coming around to our way of thinking. The future of the UK is “not all negative”, they say (which is nice). We should get a “thin” trade deal (this may be the best kind) to work with; we will recover fast post-Covid-19; and crucially our equities are cheap (on a 10%-15% price/earnings discount to most European markets), and value orientated.
That value bias has not served UK investors well in the growth-crazed environment of the last few years. But it might now – see our cover story on the great stockmarket rotation and the return of the commodity supercycle. The latter comes with one of the oldest stockmarket stories there is. Demand fell. Prices fell. Supply contracted. Now demand is on the up again. The supply isn’t there to meet it. So prices are rising.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Not all value-orientated stocks will recover in the same way. As Barry Norris points out in an upcoming podcast the way in which this crisis has dragged out has meant that some of the things that looked like short-term behavioural adjustments in April may now settle in as habits.
So while we will go back to our offices (we have to – careers are made from face-to-face contact) we won’t go to them quite as much as we did. Office space will stay a little less valuable and residential space a little more valuable than before (UK house prices are up 6.5% on the year and mortgage approvals are at a 13-year high). High street shops without a special experience element or a thriving online business won’t make it (as we can see from the fall of Philip Green). But come the spring, an awful lot of other things will go back to normal and far, far beyond. With the saved (and newly-created) Covid-19 cash burning holes in our pockets, we will eat, drink, shop and travel ourselves into a brilliant economic boom. Goldman sees UK GDP rising 7% next year. You’ll want to be invested in that.
What you won’t want to be is complacent. As John notes, government responses to the deflationary threat brought on by their lockdowns have been pretty much the same everywhere: huge money creation. Once that money gets moving in our new boom, it will create inflation. Then things will get more complicated (more on why you should worry about this in next week’s podcast with market strategist Russell Napier) and (once we get to 4% or so, says Napier) we will need to rethink our equity exposure. Stocks may be on the edge of a “roaring early-20s” rather than a “roaring all-of-20s”. Meanwhile some of you will want to hedge that inflation (and the nasty combination of inflation rising far above interest rates) with a little bitcoin. I’m sticking with gold. Bitcoin has no history of successfully preserving capital in times of inflation and financial repression. Gold does.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
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.
-
The best properties for sale for around £500,000
Properties for sale for around £500k – from a Grade II-listed former rectory in County Durham to an early 19th-century chateau in southwest France.
By Natasha Langan Published
-
M&S recovery has momentum: will it stick?
After years of decline, M&S seems to have turned a corner. But is this just a “dead cat bounce”?
By Dr Matthew Partridge Published
-
M&S recovery has momentum: will it stick?
After years of decline, M&S seems to have turned a corner. But is this just a “dead cat bounce”?
By Dr Matthew Partridge Published
-
Ukraine invades Russia – what are the political implications?
Ukraine's surprise invasion into Kursk could change the course of the war politically
By Stuart Watkins Published
-
Indonesia’s new $30 billion capital city is hit by 'delays'
What is causing the delays in Indonesia’s new capital city and when will it be complete?
By Stuart Watkins Published
-
How SMEs can secure public sector work
When it comes to bidding for public sector work, there are a few things SMEs can get a grip on
By David Prosser Published
-
Indian tycoon snaps up BT stake – is a trade deal in store?
India's Bharti Global takes up a majority stake at BT, which could imply full control of the telecoms company. What does it mean for trade relations between the two countries?
By Matthew Lynn Published
-
Will tariffs trigger a new era of trade wars?
Tariffs levied on imports could spread if Donald Trump returns to office. What does this mean for Britain and the global economy?
By Philip Pilkington Published
-
Maduro clings to power in Venezuela – can he last?
While Maduro clung to his presidential seat, Venezuela's election protests paint a different picture
By Dr Matthew Partridge Published
-
CrowdStrike IT outage: a global meltdown
Millions were affected by the CrowdStrike IT outage recently, which grounded flights and took the news off the air. Was this just a hiccup or a warning of much worse to come?
By Simon Wilson Published