Recent coverage of the UK stock market has been some of the most negative in its history. Many investors now scorn the market as a relic of a bygone age, stuffed full of old smokestacks and dusty insurance offices, with some awkward imperial legacies thrown in for good measure.
Those of that mindset may view the situation as something akin to the final day of trading at Woolworth’s, or, perhaps a red telephone box repurposed as a storage point for the village defibrillator. In other words, what’s inside might be useful, but the outward appearance is old-fashioned and incongruous in the brave, new tech-driven world.
In this context, it’s no surprise that the UK stock market is cheap relative to its history. What’s different this time is how cheap it is relative to other markets, too. At the start of 2024, the FTSE All-Share price was equivalent to barely 10 times company earnings – almost as low as it was at the end of 2008, in the teeth of the financial crisis. In 2008, however, the S&P 500’s trailing ratio stood at 12 times earnings. At the start of this year, it was a much more expensive 24 times.