UK stocks have underperformed other major developed markets so far in 2018, extending a pattern that has been in place since the June 2016 vote to leave the EU. A longer-term analysis also suggests Brexit isn’t the only thing weighing on UK companies, so why should investors be interested in UK equities now? We think investors are pricing in a fairly negative Brexit scenario, and see UK shares as offering fundamental value and opportunity in differing economic outlooks.
The threat of higher inflation and rising interest rates spooked global stock markets in February and pushed up government bond yields. We expect the trend of rising yields to persist and be a dominant investment theme over the coming year, with implications for equities.
In a post-Brexit world, Britain may have to become less reliant on its financial services sector and the South East.
The UK’s multinational companies got a big bang out of Brexit, but it was over quickly. Since then there’s been no meaningful difference in performance with their smaller and more UK-focused peers, despite the stream of negative press around Brexit negotiations.
Whether you’re chanting it from a tent in Glastonbury or howling it at Radio 4 in despair, the name Jeremy Corbyn tends to incite some rather impassioned reactions.
Political uncertainty has dominated global events over the past couple of years. Surprise voting patterns have delivered Brexit and President Trump followed by an indecisive UK general election result. A minority government is now negotiating the terms of the divorce from the European Union (EU).
Africa has long been a continent of unfulfilled promise but is it poised to finally become the economic force it wants to be? Investment in infrastructure like railways, roads and ports could light the touchpaper to a brighter future.
Investors today are paying a relatively high price for domestically focused UK companies compared with their multinational peers, which seems counter-intuitive given Brexit uncertainty. For investors, this divergence is creating both opportunities and challenges, which are the focus of our lead article “Digging below the surface of UK indices".