But is this time different?

History may be less useful than normal in working out what could happen to equity markets at present. While a drawn-out recovery may appear a reasonable expectation, equity markets in other parts of the world have been dancing to a different tune.

The US market is more than 10% higher than its January peak. Japan is up 4%. Emerging market equities are up 9% in local currency terms (5% in sterling terms). Eurozone equities are still down, but only by 6%. The UK is an outlier in terms of the weakness of its recovery.

We have to remember that the strength of the response from central bankers and politicians this year has been unprecedented. Governments have underwritten loans to companies and paid furloughed workers’ wages.

Central banks have injected tremendous amounts of liquidity into the financial system. We have never before seen support on this scale.

Equity markets are looking through the current malaise to an anticipated rebound in activity next year and the one after. That is why equity markets have recovered so strongly in parts of the world.

The question then is why the UK has been left behind? Brexit cannot be ignored, as the risk continues to influence international investors’ perceptions of the UK market.

The UK also entered the year with a relatively large allocation to commodity sectors, which have fared poorly.

UK stocks are cheap, the smaller the cheaper

But, there is a positive side-effect for the UK from having underperformed its global peers: it is currently very cheap in valuation terms compared with global stocks.

Other Wealth Management sites

Cazenove Capital UK

What we offer

Insights

Events

Contact us