Stocktake: Will 2021 prove better for unloved UK stocks?

Mass Covid vaccination and Brexit clarity ‘may mark beginning’ of better times

2020 was a year to forget for the UK stock market. Photograph: iStock

2020 was a year to forget for the UK stock market. Photograph: iStock

 

2020 was a year to forget for the UK stock market, with the FTSE 100 badly underperforming both European and global markets after suffering a double-digit percentage fall.

Hit hard by Covid, Brexit uncertainty, dominated by out-of-favour old-economy sectors – as Fidelity put it, “if Britain were a middle-aged man, he’d have just got divorced, lost his job and received bad news from the doctor”.

Is more misery in store in 2021? Fund managers certainly aren’t keen, with November’s Bank of America monthly fund manager survey finding the UK to be the most under-weighted region in the world.

Still, contrarians are tempted by a market that is, as Fidelity put it, “starting to get interesting”.

Global markets

The FTSE 100 is well below 1999 levels and is as low it has been in nearly 50 years relative to global markets, notes Fidelity. Société Générale also points to valuation, noting the FTSE 100’s forward price-earnings ratio is 33 per cent cheaper than the S&P 500.

Research Affiliates is especially keen. In terms of investor risk and reward, the UK is “unrivalled”, it says, with a cyclically-adjusted price-earnings (Cape) ratio that is lower even than emerging markets.

Of course, the UK has looked cheap for years, but Research Affiliates reckons mass vaccination and an easing in Brexit-related uncertainty “may mark the beginning” of better times for unloved UK stocks.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.