🇬🇧Why This Market Is Seriously Lagging Behind And What Lessons Are In It For You

We’ve been on a wild and pretty global rally. And we’re still going strong. The US had a bit of a head start as their bull-run began in 2012 but the others joined in in 2015. Anyway, stock markets have been going up. And up. And up. And for quite some time now!

But sadly, for the UK stock market, it’s barely budged. The FTSE 100 is right back where it was in 2015. For UK fund managers and investors alike, this is really disappointing. And a tad embarrassing if I’m honest. I suppose they could always try and blame this one on Brexit!

But there’s a silver lining, there always is. The UK market looks to be one of the few standing that hasn’t priced in perfection. While the US is trading on uber-frothiness; the UK is plodding on soggy multiples. It’s cheap. Not a word we often get to hear these days when it comes to asset prices since everything from stocks to houses are bloody pricey. But the UK is cheap. For better or worse.

We’ve gotta understand what it is that the UK lacks that makes it so unappetising. For investors at least. So let’s start with looking at what we Brits love (after fish ‘n chips!). And that’s income. Income is safe. It’s secure and it’s great for pensions. These guys can eat this (income) dish all day long. For breakfast, lunch and dinner. 

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Try it first

These guys might think why risk it waiting for maybe-growth when you can get money right now. Yeah, well, dividend stocks are only going to get you (and your dosh) so far. This means that they’re ever so hard on growth. Too hard if I’m honest with you. And our obsession with income has meant that this little island has missed out on a spectacular growth rally. 

Don’t get me wrong, I do love a little bit of income especially during inflationary periods (and to diversify) but I want growth, too. After all, I’m investing to grow my capital. I’m not nearing retirement (not for another five decades!) which means that investing for income is not my focus. Growth is.

Psychologically, we tend to focus on investing in our home turf. But it’s so important to cast your net further afield. After all, betting on one single area is dangerous. Even if that’s what almost everyone is doing these days! Imagine if you’d have only invested in the UK with a tad in the US and China. Well, you’d have missed out on a whole lot of growth. And I bet you’d be regretting that.

I have a hunch that UK investors don’t have the same appetite for growth as our US buddies. They’re so obsessed with dividends that it blinds them from the growth ahead.

Tech flop

This year, tech has really ramped up and by extension, fintech has emerged as a real force. As a fintech investor and enthusiast, it’s exciting to see what has been unfolding. And it looks like Europe – and in particular London – appears to be leading the race!

But there’s a slight problem. The tech companies that have listed on the London Stock Exchange were, um, not exactly greeted with the proverbial red carpet. New York knows how to do tech. It’s in their blood. UK investors, hmm. Not so much.

I hope this changes because we’ve got some really successful tech companies but since they’re just so cheap (as we’re not too interested in them) they’re getting snapped up by foreigners. And if we are interested in them, we call them too expensive. So their share prices just keep on sliding.

But luckily, we live in a world where we can buy stocks in many other countries at the click of a button. And just because you live in Europe doesn’t mean you can’t invest in other continents (ahem, North America) that actually understand technology.

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Just two weeks ago, I read that Blue Prism (a British robotics software maker aka the cool stuff) is in the middle of a bidding war as we speak with none other than a US private equity group. They’re offering £1.2 billion for this blue gem. Oh well, I suppose commiserations are in order. 

There were a whole host of tech companies that went public on the LSE during the pandemic from Wise (previously TransferWise that specialises in cross-border payments), to Deliveroo (yeah no need to explain that one!) and Alphawave (that focuses on chip technology). Now where do you think all these guys are trading at? Hint: It’s not what you think. 

Wise is down (-14%) since its IPO; Deliveroo is down (-15.7%) while Alphawave has tanked by 56%. OUCH. People have been calling these newly-listed tech companies very expensive. And they might very well have been.

If investors don’t start to appreciate the few tech companies that they actually have, the danger is that future ones will decide to list in New York (big dent to Britain’s ego) or worse, they’ll get snapped up. Because what’s better than a tech company? A cheap one. And, you know what they say you only realise when you had all along when it’s gone. 

As a financial hub, London should be doing more to encourage growth and innovation. To ensure that their tech guys stay there, and invest in them rather than hopping across the pond.

Perspective is key

But you know what I’m gonna say! Nothing lasts forever. I know that investors seem to think that all this US growth is going to continue till infinity but if there’s one thing that’s true is that what goes up must come down. It’s practically impossible for anything – even glam growth – to keep on going. And going. Without losing even the teeniest bits of steam. 

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I am well aware that EVs are needed as part of our transition to net zero. After all, our gas guzzlers are a no-no for the environment. But, there won’t be multiple EV companies dominating the market. It doesn’t work like that. There will be one, or two winners at most. But right now it looks like every EV maker (from Tesla to Rivian) is heading for the stars.

Putting all that aside, I’ll leave you guys with a most brilliant from Warren Buffett that sums it all up: “be fearful when others are greedy, and greedy when others are fearful”.

Right now, I think we’ve got a lot of greed going on. Not to mention some FOMO and TINA (There Is No Alternative: since bond yields are so low, investors have no choice but to venture into riskier areas) which is creating quite the concoction. And a lot of froth.

Prepare Yourself

I dunno about you but I’m building up a cash pile for when markets tumble. This narrative is making me feel a bit queasy and, you know me, I hate overpaying for things!

At the end of October I bought some clothes and now I see they’ve been discounted by 35%. Whoops. Now this is only clothes, it’s not my nest egg. So overpaying for investments is a whole lot worse.

When you buy right at the top (I’m not saying that we’ve got there yet it just looks a whole lot like it!), there’s always the risk it’ll come slipping right back down to earth. 

So keep your eyes peeled folks. Don’t be too greedy since nothing is guaranteed and channel that inner cynic! Question the status quo and dig deep.

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.