The UK economy – why we are more positive

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The UK economy – Why we are more positive

We are often drawn to areas of the stock market that have fallen out of favour. Investor antipathy towards certain stocks or sectors becomes embedded in valuations and it is that undervaluation which sparks our interest.

Domestically-focused UK stocks have become too cheap Valuation premium of UK domestic stocks vs UK exporters Read more 15.1% Average since 2009 10.6% Before Brexit vote -10.3% Now Banks back in business Lending growth highest since before financial crisis as UK banks' balance sheet strength returns Read more 4.3%* UK bank capital ratio in 2006 13.5%* UK bank capital ratio in 2016 *Estimated common equity tier 1 capital to risk-weighted assets *Est common equity tier 1 capital to risk-weighted assets UK construction industry has positive fundamental dynamics Fixing the broken housing market Read more 177,000 UK housing completions 2016 1.5M Estimated UK housing deficit UK vs global — contrasting expectations Forecast annual economic growth rates (2017-2019) Read more 1.5% UK growth - expectations too low 3.3% Global growth - expectations too high
Domestically-focused UK stocks have become too cheap

Valuation premium of UK domestic stocks vs UK exporters

Read more

15.1% Average since 2009

10.6% Before Brexit vote

-10.3% Now

Banks back in business

Lending growth highest since before financial crisis as UK banks' balance sheet strength returns

Read more

4.3%* UK bank capital ratio in 2006

13.5% UK bank capital ratio in 2016

*Estimated common equity tier 1 capital to risk-weighted assets

UK construction industry has positive fundamental dynamics

Fixing the broken housing market

Read more

177,000 UK housing completions 2016

1.5M Estimated UK housing deficit

UK vs global — contrasting expectations

Forecast annual economic growth rates (2017–2019)

Read more

1.5% UK growth – expectations too low

3.3% Global growth – expectations too high

Sources: Morgan Stanley, The Lazarus Partnership, The MacroStrategy Partnership, Peel Hunt, Bloomberg, Woodford

Find out why we’re positive on UK equities

Compelling valuations in domestic cyclicals

Mitchell Fraser-Jones 29 June 2017 5 min read

Recently, we have seen value emerging in parts of the market that have fallen out of favour, in part as a result of last year’s Brexit vote. Many domestically-focused stocks now look more compellingly attractive than they have done in years.

Read more

Banks back in business

Mitchell Fraser-Jones 29 June 2017 5 min read

For the first time in many years, after a prolonged period of rebuilding capital and recognising losses, UK retail banks are an attractive investment proposition.

Read more

Fixing the broken housing market

Mitchell Fraser-Jones 29 June 2017 7 min read

One part of the UK economy that looks well placed to benefit from this benign outlook is the construction sector. Here we see an industry with positive fundamental dynamics and a long-term opportunity, underpinned by the public sector.

Read more

Contrasting expectations

Mitchell Fraser-Jones 29 June 2017 5 min read

While we have a positive view on the domestic economy, we remain considerably more cautious about the prospects for the global economy.

Read more

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