With the UK stockmarket reaching heights not previously seen since April 2015 and close to reaching new highs, we consider whether the current rally is likely to last?
The movement in market levels upward has been dramatic and considered by many to be surprising given the vote for the UK to leave the European Union has generally given rise to more questions than answers.A key distinction is becoming apparent under current market forces, large cap multi national exporter stocks are benefitting to a large extent from weaker sterling however, domestic focused companies remain under pressure as UK economic growth looks precarious.
Recent falls in the value of sterling has been matched by an inverse increase in the value of the UK stock market index, a pattern which investors are profiting from but also gives rise to greater uncertainty.Economic commentators remain polarised on the likelihood of a UK recession, but consensus opinion is that the UK will suffer some form of economic slowdown during the coming years of Brexit negotiations.
Investment markets have generally ignored the likelihood of economic slowdown and have already skipped ahead as they consider the benefits of looser monetary policy and accommodative policy making.Against this backdrop, we are not looking to add any further exposure to UK stock market investments within portfolios and will continue to maintain diversification across various global equity markets and non-equity investments such as fixed income, property and cash. If your portfolio has not been reviewed in light of recent developments, you could be missing out on opportunities for growth or you could be potentially over-exposed to individual areas.