UK equities have been out of favour for many years. Underperformance relative to global markets - whether coincidentally or not - started around the time of the Brexit referendum in 2016.
Although UK equities have long been overlooked, we argue that the asset class should not be ignored - not by UK, nor by international asset allocators. It offers something that is as different as it is attractive. And both these qualities are important.
The overall shape of the FTSE All-Share Index is very different to the S&P 500, and indeed to the MSCI Europe ex-UK Index. There is minimal exposure to tech, but greater exposure to consumer staples, energy, basic materials and financials.
And UK equities are looking undervalued at present. In September, the FTSE 100 had a price-earnings ratio of 11.13x, compared to a global average of 13.16x and the S&P 500 sitting at 21.02x.1 That would suggest this is an ideal time for value investors to engage with the market.
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1 Bloomberg, as at 30 September 2023
