Where next for the UK stock market?

Tak­ing the tem­per­a­ture of stocks head­ing into the fi­nal months of 2017

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THE FTSE 100 re­mains in touch­ing dis­tance of record highs but there is still con­sid­er­able un­cer­tainty over the Brexit process and the loom­ing is­sue of a UK in­ter­est rate rise – pos­si­bly as early as next month (2 Nov).

Canac­cord Ge­nu­ity says in­vestors should con­sider the rel­a­tive un­der­per­for­mance of UK shares against other global bench­marks when con­sid­er­ing where the market is headed next.

The Canac­cord team notes the FTSE All-Share is only up by 12% over the last 12 months against the US S&P 500 up 21% and the Euro Stoxx up 23% de­spite the ben­e­fit from weaker ster­ling and the strong per­for­mance of min­ing stocks which are more heav­ily rep­re­sented in the UK than else­where.

They sug­gest this sit­u­a­tion im­plies there is al­ready a high level of po­lit­i­cal/eco­nomic risk em­bed­ded within both the broad UK market, and the mid-market specif­i­cally.

‘With po­lit­i­cal risk not ob­vi­ously lower in other in­dus­trial mar­kets, we don’t see this un­der­per­for­mance as mer­ited’. Over­all, they see the UK market as be­ing in ‘good health’ with solid per­for­mance, a de­cent eco­nomic back­drop and val­u­a­tions a lit­tle on the high side but ‘within nor­mal ranges’.

The main risks iden­ti­fied are a de­te­ri­o­ra­tion of the po­lit­i­cal sit­u­a­tion and weak growth in wages. (TS)

UK stock market is lag­ging its US and Euro­pean peers

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