Is The UK Market As Good Value-Wise as it Seems? - Your Adviser Knows!

“The current reputation of the UK market has suffered due to the Brexit vote and the potential repercussions arising from it. Both retail and institutional investors are staying away, making the market one of the world's least popular. Brexit uncertainty is the reason for this, however the UK's all companies sector has been out of favour since 2014.

Equity income has been the most popular way to gain exposure to the UK market, with the UK all companies sector being unpopular in 2010, 2011 and 2012 also. However, is this based on actual performance or just perception?

Actually the two sectors have performed similarly as the IA UK all companies sector outperformed the UK equity income sector at 49% to 47%. Since the Brexit vote, this trend has continued with the all companies sector returning 34% vs 28% for the income sector.

The IA global sector was up 36% and the IA global equity income sector was up 27%, meaning that those investors that did abandon the UK, have not seen significantly higher returns.

Part of the reason for this is the fact that the newly cheap pound increased overseas earnings for UK companies relatively.

Value to be Found

The low pound could also be catalysing interest from overseas companies in acquiring UK firms, going against the judgements made by retail investors, and suggesting that for some at least, the UK market offers an attractive proposition.  

Signs of strain

Low unemployment and positive wage growth are some of the positive signs for the economy. Growth however is being revised downwards, most recently from 1.8% to 1.4% for 2018. Mooted interest rate rises have also not eventuated, suggesting that the Bank of England remains tentative about the recovery.

Despite this, some fund managers insist that UK stocks are undervalued and provide significant opportunities for growth.

Your financial adviser can help to make sure you are sufficiently diversified and in the right investments that will help you to achieve your long term goals.

The value of investments and income from them may go down as well as up and you may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.

Past performance is not a reliable indicator of future performance.