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Can diversification paper over the cracks in capital goods?

Investors have bid up shares in capital goods companies due to their overseas earnings, but investors should still tread carefully
July 28, 2016

Britain's vote to leave the European Union (EU) could significantly prolong subdued trading conditions across the largely cyclical UK capital goods sector - if forecasts from some of the world's leading economists are anything to go by. Yet the market reaction suggests investors are prepared to stomach the risk of another global recession in exchange for greater exposure to equities capable of profiting from the plummeting pound.

Over the past few decades, the nation's industrial giants deliberately diversified to protect against geographical and market shifts. In the days following the referendum these international characteristics were highly sought after by investors, many of whom took immediate action to distance themselves from UK-centric stocks.

 

Dollar earnings come up trumps

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