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Growth agenda for the economy in UK market

December, 27, 2024-03:32

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Growth agenda for the economy in UK market


The UK market continues to be perceived as affordable, yet it is beginning to attract interest from investors as we approach 2025. After experiencing 41 consecutive months of net outflows from UK stocks, November finally brought a net inflow, sparking renewed interest and optimism among analysts.

The Labour government secured a significant electoral victory last summer, which may lead to political stability over the next five years. This stability, coupled with a growth strategy that includes an extensive housebuilding initiative, could positively impact the economy. However, this optimism must be tempered by the initial economic challenges faced by Sir Keir Starmer and Rachel Reeves, including a pessimistic outlook and an unpopular budget that has been criticized for contributing to stagnant economic growth.

Finance experts are evaluating the performance of FTSE indices in comparison to global competitors in 2024 and are making optimistic forecasts for the pound. They have also identified several UK stocks that may be worth monitoring in the coming year.According to investment research firm Edison Group, UK equities are at a crucial juncture that may present a rare opportunity. Despite still trading at their most significant discount to global counterparts in over 30 years, November 2024 marked the first net inflows into UK equities after a prolonged period of outflows, indicating a shift in investor sentiment and highlighting the unique potential of the UK market.

Currently, UK equities are valued at a 40 percent discount and have a forward price/earnings ratio of 10.5x, in stark contrast to the US market's 26. With US market dominance reaching 70 percent of global indices, there is a growing trend among US-based funds to seek diversification, as noted by Edison.
Edison emphasizes that the UK markets present considerable attractiveness, suggesting that its equities could serve as a foundational element of a balanced, forward-thinking investment portfolio due to several factors:
- The conclusion of the zero interest-rate policy era and rising inflation favor the UK’s capital-intensive, cash-generating enterprises;
- Increased corporate activity.