But as John Baron argues on page 34, the case against UK shares in the unlikely eventuality of the WTO outcome still doesn’t justify the level of revulsion towards them. Besides which, the odds appear to be swinging towards a softer exit, or maybe no exit at all, and that could mean the broad rationale behind the weakness of UK markets is further unjustified. So, as James Norrington recently suggested, buying UK shares could be an opportunity to win at Brexit – even if right now it feels as though everybody is losing.
It’s worth exploring a counter-view, though, which is that maybe the UK is cheap for another reason: that the quality of the UK market is poor – ie, the ‘you get what you pay for’ argument. Algy Hall tells me that the results of his stock screens are getting more “shonky”, a possible consequence of where we are in the economic cycle (the end). And as Phil Oakley and I have regularly discussed on our weekly podcast, finding quality shares at the right price is getting tougher and tougher – the reason why a third of his fantasy Sipp comprises US shares, where quality seems to abound.
Maybe I am being unfair, and it may be that there are no more poor-quality companies here than there are on any other market, even the US. The Debenhams saga and various Aim blow-ups may give the impression that the UK market is a ramshackle collection of at best badly-run and at worst fraudulent companies. But remember that the US has seen an identical pattern of retailer collapses, and more than its fair share of dodgy flotations (I refer you again to the excellent China Hustle documentary on Netflix).
Indeed, I suspect the reality is that this is simply a numbers game – that the relative scale of the two markets means the US simply has more to choose from, whether that be high-growth technology companies (largely absent in the UK), interesting mid-caps you may never have heard of (or may have if you’ve read columns by our occasional US contributor Todd Wenning), or some of the biggest dividend-payers on the planet. We’ve run the slide rule over 10 of these in this week’s cover feature, ideas that may help you diversify your equity exposure to shift towards the allocations successfully favoured by professional portfolio managers.
