Ride the global market rebound with bargain British stocks

The Bank of England has expanded its quantitative easing (QE) programme. That bodes well for British stocks – which have not been this cheap compared to their global counterparts since 1973.

The Bank of England has expanded its quantitative easing (QE) programme in response to the second English lockdown. The Monetary Policy Committee (MPC) voted last week to buy £150bn more government bonds with printed money, taking the total value of its quantitative easing programme to £895bn, about 40% of 2019 UK GDP. The Bank also forecast that it will be early 2022 before the UK economy returns to its pre-pandemic level.  

The Bank’s new bout of bond-buying comes as government borrowing spirals ever higher, says Liam Halligan in The Daily Telegraph. Since March, the Bank has printed “more than three times what we spend on the NHS in an entire year”. Soon it will “own almost half the entire store of UK public debt”. The “historic precedents” for such rampant money-printing are hardly comforting. That such a “dangerous and controversial economic policy” has been undertaken with scarcely any public debate is “utterly mad”.  

For now, however, yet more liquidity bodes well for British equities – which have not been this cheap compared to their global counterparts since 1973, as Stefan Wagstyl points out in the Financial Times. There are good reasons for the steep UK discount: the FTSE has a glaring “shortage of tech stocks”. Thanks to Covid our economic performance looks likely to be “among the weaker developed economies” over the next two years, which will hit company profits. Foreign businesses “don’t have to contend with Brexit” uncertainty either. Yet from AstraZeneca to Diageo the UK market boasts savvy global operators. Some of the top blue-chips earn up to 70% of their profit overseas. Things are bad now, says Wagstyl, but are they really as bad as 1973 when “strikes... and power cuts” left me “to do my homework by candlelight”?

Recommended

Lloyds poaches its new boss from HSBC
Bank stocks

Lloyds poaches its new boss from HSBC

The high-street lender has appointed Charlie Nunn, HSBC’s head of wealth management, to be its new CEO. He faces a towering in-tray. Matthew Partridge…
3 Dec 2020
Debenhams closes its doors
UK stockmarkets

Debenhams closes its doors

Debenhams is to close all of its 124 stores after JD Sports ended discussions over a rescue deal.
3 Dec 2020
3 December 1984: BT is sold off in a gamble over privatisation
This day in history

3 December 1984: BT is sold off in a gamble over privatisation

In a landmark test of privatisation, the government sold off over half its stake in British Telecom, on this day in 1984.
3 Dec 2020
Vaccines, value investing and UK stocks
Value investing

Vaccines, value investing and UK stocks

Vaccines promise a return to normal life. And that bodes well for “value” stocks, says Merryn Somerset Webb – and for the UK market in particular.
30 Nov 2020

Most Popular

This week’s rally in value stocks is just the beginning
Value investing

This week’s rally in value stocks is just the beginning

The arrival of a vaccine this week saw huge gains in the markets and investors switching out of big-tech growth stocks and into “value” stocks in more…
13 Nov 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Nov 2020
Time for investors to be fearful, not greedy – and sell?
Investment strategy

Time for investors to be fearful, not greedy – and sell?

The Covid-19 crash proved a great investment opportunity. Does the vaccine mean it’s time to sell?
23 Nov 2020