UK stocks – a mixed bag

Brexit or not, cyclical factors do not favour UK stocks in a maturing bull market.

Compared with global stocks, UK stocks are skewed heavily toward commodities and defensive sectors and almost no tech. Accordingly, they usually outperform global markets in the middle of bull markets. Since 1970, the MSCI UK outperformed the MSCI World 100% of the time during the middle-third of bull markets’ lifetimes. But during the final third of those markets, UK stocks underperformed on five of the last six occasions, with a median lag of -17.2%. The one time they outperformed — during the 2003-07 bull market — there was a global commodities boom, benefiting UK markets’ high energy and materials weighting. Not so today. The consensus from experts is don’t overweight UK stocks — and be selective.