How to capitalise on the pessimism around Britain's stock market

There was little in the Budget to prop up Britain's stock market, but overall pessimism increases the extent to which opportunities can keep hiding in plain sight. Investors should take advantage while they can, says Cris Sholto Heaton

(Image credit: Nikolas Kokovlis/NurPhoto via Getty Images)

By Cris Sholto Heaton

published 7 December 2025

in Features

“There is a great deal of ruin in a nation,” wrote the economist Adam Smith, meaning that a successful country can withstand a lot of mistakes and incompetence before it is destroyed. He did not, of course, intend it as an open invitation to politicians to try their worst. That point appears to have been lost on every British government of the past decade.

The latest Budget is a deeply dispiriting one: anti-growth, anti-optimism and anti-investing, as Andrew, Kalpana and I discuss on the new MoneyWeek Talks podcast. It goes without saying that there was nothing to alleviate growing fears of long-term economic decline. What felt like a new low was the undermining, for no obvious reason, of things that still work.

The reversal of much of the ISA flexibility brought in just a decade ago. The slashing of tax relief on venture capital trusts at a time when fundraising has been weak. The cap on salary sacrifice for pension contributions. These were accompanied by pointless ideas such as the three-year break from stamp duty for new initial public offerings (IPO), which will do nothing to revive the increasingly moribund London Stock Exchange. All suggest a chancellor and a Treasury who have no clue what they are trying to achieve.

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Hidden opportunities in Britain's stock market

Still, the level of pessimism about Britain and the lethargy of the stock market probably increases the extent to which opportunities can keep hiding in plain sight. Take investment trusts. There are several sectors that trade at yawning discounts to net asset value (NAV), including infrastructure, renewable energy, private equity, real estate and various niche strategies. In some cases, these discounts will be justified – reported NAVs will not be realistic and we see this when funds take huge write-downs as they wind down and try to sell assets. Yet in other cases, we see funds carrying out sales near their carrying value or better, which helps to validate NAVs. Overall, there is a substantial amount of mispricing, with not enough investors to do all the hard work.

This situation will not persist indefinitely. Where assets are worth more than their market price, they will be taken out by specialists. These are one-time gains, and the market will shrink as they are snapped up, which is not good for the long-term health of London. But as investors we can only take what chances we are given.

More attention from activists will help speed this process along, so it’s worth taking a look at MIGO Opportunities Trust (LSE: MIGO), one of a handful of funds that invest in other closed-ended funds. Under Charlotte Cuthbertson and Tom Treanor of Asset Value Investors, the trust’s strategy is shifting towards a more concentrated portfolio and greater engagement to unlock value. At £75 million in assets, it can take meaningful positions in small targets and will have limited overlap with AVI Global Trust (LSE: AGT), its £1.3 billion stablemate. This makes it an obvious way to capitalise on some of the market’s blind spots.

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Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.