for Money this month, Unhedged’s Ethan Wu said that — for long-term investors — there is “almost never a bad time” to buy US stocks.
Credit Suisse’s picks, from April this year, are broadly similarly outward looking: Informa, RELX, Bodycote, Coca-Cola HBC, ABF, ITV, Elementis, Unilever, British American Tobacco and Imperial Brands. Its analysts see the UK as offering desirable “defensive value” — but that isn’t much of a long-term strategy.
Plus, if you want some defensive allocation to offset riskier assets in your portfolio, gilts, which are still carrying a risk premium that makes them more attractive than rivals from Germany and the US, is a better option. The only reason to worry would be if you think the UK is going to go bankrupt. Things haven’t got that bad.
“The hope is that this triggers a virtuous valuation cycle that encourages investors to crowd in these flows, and growth companies to raise capital on UK capital markets,” says French — who called it a “small ray of light”. “In our view, any UK discount cannot be attributed to foreign investors’ lack of appetite for UK assets but rather a lack of domestic desire to hold [UK] equity,” Bell wrote.
So, a defensive argument for large-caps and a growth-based one for small- caps. What about the mushy middle?