2020 has been a terrible year for UK stock market investors. While no-one could have predicted the chaos from Covid-19, it has exposed the frailties of the UK economy and the business models of many companies listed on the UK stock exchange.
Put simply, the value of the UK stock market – as measured by the FTSE All-Share Index – has been too concentrated in very big companies that have very poor growth prospects and in many cases are declining or expected to do so. Big oil companies, banks and insurance companies are good examples of this and their poor share price performances over the past decade has reflected their deteriorating prospects..
Unlike the US market, the UK market contains few giant global leaders that have been able to drive the value of it higher. Yet outstanding businesses do exist in many medium and smaller-sized companies.