Joseph Clark
After years of lackluster performance, UK stocks now trade near their lowest relative valuations in modern history. However, despite local economic weakness, many of the UK’s leading companies are multinational, and derive the majority of their revenues from offshore sales – presenting an opportunity for active investors to tap into the robust global growth potential of these discounted UK multinationals.
UK price/earnings relative to the world
MSCI United Kingdom Index PE divided by MSCI World Index PE, 2004–present
Source: Factset, MSCI, Principal Asset Management. Data as of December 31, 2023.
Over the past 20 years, the weight of U.K. stocks as a share of the global equity market has slid by more than two-thirds, now standing at less than 4%. The 2016 Brexit referendum only worsened the UK’s equity position, and since, broad market returns have significantly lagged global peers.
With a weakening currency,…
