US & UK Equities – Q4 Investment Update

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  • October 10, 2019

UK Equities have underperformed developed market peers as they were hit with higher no deal Brexit fears as well as emerging market concerns, to which the UK equity market is overly exposed.

Valuations in the UK equity market remain very compelling, trading at a significant discount to most other markets, expanding their discount over the quarter. While some of this is justified given the unique risks facing the UK, on a medium to long term view this appears to be a significant buying opportunity.

Sterling has been a big mover in the quarter following the election of Boris Johnson to Conservative Party leader and subsequent hardening of the government’s stance to a no-deal. As market participants have increased their expectations of a no-deal, the pound has fallen. This has increased the attractiveness of those assets that have foreign currency exposure, either through global operations or through exports.

Below we’ve included the latest Asda Income Tracker. It shows that there has been a continued improvement in the level of household disposable income. Wage growth has continued, and inflation has stayed moderated, falling to 1.7% in August. The tightness of the labour market looks set to continue. Not only is the unemployment rate at cyclical lows the makeup of employment has improved significantly over the last year, with an increase in full-time employment. This inherently reduces the slack in the system. Nevertheless, the ultimate outcome of Brexit may send the dynamics of the labour market in either direction.

US Equities

US equities have continued to perform well but not wholly out of line with international peers. As previously, it appears that US equities are subject to a greater degree of volatility when there are market rotations/ selloffs/ rallies, especially on an intraday basis.

On a valuation basis, the US market as a whole remains relatively more expensive than global peers. The outlook for earnings growth continues to be muted as investors’ fears of an economic slowdown has dampened earnings expectations.

The presidential elections are now coming over the horizon and may increasingly impact markets, and certainly increase volatility. Historically, areas such as biotechnology have been impacted, as high drug prices are an easy win for politicians. Much will depend on who wins the Democratic nomination.


Posted By Will Dickson

Chief Investment Officer Will Dickson is a Chartered Wealth Manager as part of the Chartered Institute of Securities and Investment (CISI) qualification scheme. This recognition was obtained following an MSc in Finance and Investment from the University of Exeter, and an Accounting and Finance BSc from the University of Bath. Will’s exceptional talent is recognised by CityWire’s Wealth Manager, having been named as one of the UK’s Top 30 investment managers under the age of thirty for the last three years. Will manages and oversees P1’s range of investment portfolios. Working with the Investment Team, Will shapes the investment policy and fund selection for our Passive, Hybrid and Ethical and Sustainable portfolios. In conjunction with managing the fund portfolios, he oversees and our AIM Inheritance Tax and Tier 1 Investment Visa equity portfolios. Will has joint written articles with P1’s Head of Research, Dr Rayer. Their article “Hypothesis: Risk, like Mass and Energy, can neither be created nor destroyed” featured in the CISI’s The Review of Financial Markets. In addition to contributing to articles with Dr Rayer, Will often delivers P1 CISI Endorsed lectures to Independent Financial Advisers. You can see Will’s take on weekly investment news here.