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

Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
The MoneyWeek Podcast: nuggets of positivity in an extended bear market
Investment strategy

The MoneyWeek Podcast: nuggets of positivity in an extended bear market

Merryn and John talk about he need for higher wages and lower house prices, and why the fact that this is the least dramatic bear market they’ve ever …
1 Jul 2022
Here are the best savings accounts on the market now
Savings

Here are the best savings accounts on the market now

With inflation at more than 9%, your savings are not going to keep pace with the rising cost of living. But you can at least slow the rate at which yo…
1 Jul 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
22 Jun 2022
The ten highest dividend yields on Aim
Income investing

The ten highest dividend yields on Aim

Rupert Hargreaves picks the highest-paying dividend stocks on Aim, London’s junior market for small and medium-sized growth companies.
29 Jun 2022