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”.
-
Car tax rules are changing: what are the new vehicle excise duty rates?The rules around vehicle excise duty are changing this April. What are they, and how are they going to affect you?
-
Most affordable cities for single homebuyers revealedBuying a home by yourself? Analysis by Zoopla reveals the most affordable cities in the UK
-
Three companies that dominate their markets with critical productsA professional investor tells us where he’d put his money. This week: Charlie Huggins, manager of Wealth Club’s Quality Shares Portfolio, picks three stocks.
-
Should you continue to hold Smithson Investment Trust?Opinion Smithson Investment Trust, a small- and mid-cap fund, has struggled to live up to lofty expectations, says Rupert Hargreaves.
-
Primark owner Associated British Foods is an overlooked gem going cheap — should you buy shares?Associated British Foods, the owner of Primark, is a family-owned business, which means it is passed over by the increasingly popular passive investment funds. That spells opportunity for private investors, says Jamie Ward.
-
Trump's tariffs and a shrinking market for alcohol deal double blow to DiageoDonald Trump's tariffs are a further headache for drinks giant Diageo, which is already being buffeted by a decline in alcohol consumption.
-
Three stocks in recruitment companies with promising recovery playsRecruitment agency Robert Walters and its peers are struggling, but now's the time to buy, says Rupert Hargreaves
-
Four UK data companies to buy nowCompanies that create, harness or turn data into a valuable offering could be sitting on a hugely profitable gold mine. Rupert Hargreaves picks four of the best UK data companies to buy now.
-
What’s the outlook for the shipping industry in 2025?All we know for certain about the year ahead is that it will be volatile. But the container shipping sector thrives on choppy waters
-
What investors can expect from stocks and the economy in 2025There are reasons for investors to be hopeful about 2025, with slowing interest rates and moderating oil prices. But trouble may be brewing in bond markets
