A view on UK Equities

UK Equities: for investors, everything about the UK remains in a state of flux, whether it’s the political backdrop, the economy or the stock market.
June 2019
David Moss

David Moss

Managing Director, co-Head of Global Equities, European Equities

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Risk disclaimer

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

For investors, everything about the UK remains in a state of flux, whether it’s the political backdrop, the economy or the stock market. Perhaps there are two consolations:

  1. European elections and the ongoing Democratic versus Trump battles in the US
  2. Continued concerns on trade and a general economic slowdown.

It’s pretty much the same everywhere! The problem, of course, is that the UK market is being assailed from both sides. For domestic-facing UK equities, while the economy remains robust with record employment levels, the concern remains ‘what next’ – owing primarily to the ongoing saga that is Brexit. And for those businesses that rely on exports or just have a large portion of business overseas, the issue remains the threat of a US/China trade war and the effect on both countries’ and others’ economies.

The result – and it’s almost a cliché to say it – is increased volatility. Fortunately, the ability to predict macroeconomics or politics has never been a part of our investment process. We have been, and remain, bottom-up stock pickers trying to buy for the long term what we believe are great businesses at attractive prices. This means that we do not fear volatility – in fact, we embrace it because an overreaction to a set of results or an external event can provide an entry price to buy a stock.

Risk disclaimer

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.
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“The UK market is being assailed from both sides.”

No matter the background, focusing on stock and business fundamentals makes it possible to find good opportunities – and that a difficult and volatile environment will actually provide these. It remains important to direct our efforts appropriately, following our investment process to find businesses with enduring positive characteristics, robust balance sheets and good potential cash generation. The market may then give us the opportunity to buy these businesses at great prices.

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