The UK stockmarket’s performance relative to the global average over the past 12 months has been “the worst in over 40 years”, says a Morgan Stanley note. A bungled pandemic response and ongoing Brexit uncertainty aren’t helping. Yet the key issue is the FTSE’s sector mix. This has been the year of the technology stock, but out of 15 major world markets, only Australia and Switzerland have a lower technology weighting than the UK. Our indices are heavy on unfashionable commodities and financial stocks. The FTSE 250 is down by 18% so far this year, while the FTSE 100 has shed 21%.
The FTSE 100’s cyclical sectoral composition – “consumer discretionary, energy, materials and financials” – means it is badly hit when the economy tanks but also poised to outperform when the global economy finally normalises, says Capital Economics. A no-deal Brexit would be bad news for the domestically-focused FTSE 250, but the more international FTSE 100 would probably shrug it off: a falling pound would boost overseas earnings in sterling terms, countering the negative domestic shock. UK stocks are “approaching pariah status”, as Alan Brierley and Ben Newell of Investec put it. But they are now trading at the greatest discount to global equities for 50 years. Value investors may find that some of the best bargains in global markets are available at home.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
-
Money tips for the end of the tax yearThe tax year will end on 5 April, and your annual allowances for 2024/25 will disappear with it. Here’s how to get your finances in shape
-
India's stock market decline wipes out $1.3 trillion in market valueMore than $1 trillion has been wiped off from India's stock market after investors turn to China. Has the emerging-market darling hit rock bottom?
-
India's stock market decline wipes out $1.3 trillion in market value – can investors stay optimistic?More than $1 trillion has been wiped off from India's stock market after investors turn to China. Has the emerging-market darling hit rock bottom?
-
Pensions revolution: how to profit from the trends shaping the UK pension systemThe UK pension system is one of the biggest in the world. Big changes are under way, says Rupert Hargreaves
-
Large cap stocks start to struggle – is it time for investors to reassess their focus?Buying quality large caps worked very well last decade. A more volatile world will be a bigger challenge for these star stocks, says Cris Sholto Heaton
-
How to generate income with fixed-interest investmentsPublic debt is overvalued, but other fixed-interest investments now look like a bargain, says Max King
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
-
Weight-loss drugs could revolutionise the economy – the investments to buy nowThe new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy
-
Find tomorrow’s Asian giants while they are still smaller companiesOpinion Nitin Bajaj, portfolio manager of the Fidelity Asian Values trust, picks three Asian companies to invest in.
-
AI will maintain Moody’s market lead, says Stephen ConnollyOpinion Veteran data provider Moody's has adapted well to the modern world, and is one of Warren Buffett’s longest-held investments
