Britain’s third-quarter GDP figures “disappointed – plain and simple”, says Sanjay Raja of Deutsche Bank. The economy grew by 1.3% between July and September, a sharp deceleration from the 5.5% rise in the second quarter and worse than forecast.
Supply chain problems and weak business investment played a role, while the July and August “pingdemic [held] the economy flat” before a bounce in September, Sarah Hewin of Standard Chartered told the BBC.
GDP is still 2.1% below pre-pandemic levels, worse than most other advanced economies, says Raja. The recovery is still “ticking along”, says Ruth Gregory of Capital Economics. But with headwinds from rising taxes and energy costs, “a period of sluggish growth until the middle of 2022” is in prospect.
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
British blue-chip stocks poised to catch up
Things are looking brighter for the FTSE 100, says Tom Howard in The Times. JPMorgan’s analysts have been bearish on Britain in recent years but recently shifted their guidance, telling clients to buy “near-record cheap” British shares.
The FTSE 100 could do with a break. London stocks have underperformed the global average every year since 2015. The index has gained 11.5% so far this year, compared with a 27% rally on Wall Street or the 28% gain of France’s CAC 40 (see below). Few global investors are excited by London’s stodgy banks and oil companies. Brexit uncertainty and last year’s dividend cuts haven’t helped.
After such a poor run the MSCI UK index trades on a forward price/earnings (p/e) ratio of just 12, substantially cheaper than a rating of 16 in the eurozone or 22 in America, says Emma Powell in the same paper. Overheated global equity markets will run out of steam at some point. When they do there is much less potential downside for British shares than for those elsewhere.
JPMorgan, Barclays and Credit Suisse are more negative on the more domestically-focused FTSE 250 and small caps, says Elliot Smith for CNBC. The investment banks like British blue chips more than the British economy. About 80% of FTSE 100 revenues come from overseas, while a weakening pound (see column, left) also flatters overseas earnings in sterling terms.
Dividend payouts have rebounded after last year’s disappointments, says Jeff Prestridge for FTAdviser. “Juicy company dividends… are one of the defining characteristics of the UK stockmarket”. UK plc is poised to offer “an income of some 3.5% over the next 12 months”. Try getting that from a savings account.
International investors may finally be deciding that the FTSE’s weaknesses are in the price, says Cormac Mullen on Bloomberg. “Equity bulls looking for a cheap stocking filler” for Christmas are “betting on Britain”.
-
8 of the best houses for sale with home cinemasHouses for sale with home cinemas – from a modern oast-house style property in Kent to a house in Buckinghamshire with Dolby sound and bespoke seating
-
Rachel Reeves faces £23 billion capital gains tax “black hole” – will she be forced to look elsewhere?The fiscal watchdog has downgraded its forecast for capital gains tax revenues, leaving chancellor Rachel Reeves with £23 billion less than previously expected
-
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
-
Is BlackRock World Mining gearing for a recovery?Opinion After a frustrating year, BlackRock World Mining is positioned for growth and to capitalise on the sector's recovery
-
Should you limit exposure to US tech stocks?An end to the AI boom would shake both US funds and global trackers. Here’s one way to trim exposure to US tech stocks
