Richard Hallett’s UK Market Update

For Professional Clients only. Not for distribution to or to be relied upon by Retail Clients.

“The unloved nature of the UK market is though, allowing stockpickers who use a selective approach to buy companies with robust growth prospects at attractive valuations.”

Richard Hallett

Richard Hallett is the Investment Manager of the Marlborough UK Multi-Cap Growth Fund.

Brexit uncertainty continues to act as a drag on the UK economy, holding back business investment and undermining consumer confidence.

The economy has shown a degree of resilience and is continuing to grow, but at a lower rate than before the referendum, with GDP forecast to rise by only around 1.2% in 2019. On a more bullish note, weaker sterling, while increasing import costs, makes exporters’ goods and services more competitive in international markets and increases the value of overseas earnings.

In reality though, the global backdrop may have greater significance than Brexit for the UK equity market, given its international nature, with FTSE 100 companies generating more than 70% of their earnings overseas.

US-China trade tensions have weighed on stock markets around the world and the UK has been no exception. However, despite this dispute, the underlying economic picture in these two giant nations is encouraging. Chinese GDP growth has slowed but still remained at an enviable 6.2% year-on-year in the second quarter of 2019. In the US too, economic indicators are positive and unemployment is close to a 50-year low.

The prospect of further financial stimulus, including interest rate cuts by the Fed, which is concerned about a softening in global growth, may further support equity markets. The European Central Bank has signalled it may act too, as could the Bank of England in the event of a no-deal Brexit.

In the meantime, UK equities remain at a discount to comparable markets, despite a healthy rebound in the first half of 2019, and profit warnings have increased, particularly in domestically focused sectors such as retail, industrials and construction.

The unloved nature of the UK market is though, allowing stockpickers who use a selective approach to buy companies with robust growth prospects at attractive valuations. We see a particular opportunity in companies that are benefiting from long-term structural growth trends, driven by factors such as technological advances and shifts in demographics.

Companies like these, which tend to be global in nature, have the potential to grow through the business cycle, irrespective of wider economic conditions. Investing in them when valuations are depressed relative to competitors listed elsewhere could prove rewarding for investors willing to adopt a patient approach.

The views expressed are for general information purposes only and should not be construed as investment advice.

Risk Warnings
Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds. Our funds invest for the long-term and may not be appropriate for investors who plan to take money out within five years. The fund will be exposed to stock markets. Stock Market prices can move irrationally and be affected unpredictably by diverse factors, including political and economic events. The fund invests mainly in the UK therefore investments will be vulnerable to sentiment in that market which may strongly affect the value of the fund.

Regulatory Information
This material is for distribution to professional clients only and should not be distributed to or relied upon by any other persons. It’s provided for general information purposes only and is not personal advice to anyone to invest in any fund or product. The Key Investor Information Documents and the Prospectuses for all funds are available, in English, free of charge and can be obtained directly using the contact details in this document. They can also be downloaded from An investor must always read these before investing. Information taken from trade and other sources is believed to be reliable, although we don’t represent this as accurate or complete and it shouldn’t be relied upon as such. Calls may be recorded for training and monitoring purposes. Issued by Marlborough Fund Managers Ltd, authorised and regulated by the Financial Conduct Authority (reference number 141660). Registered office: Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP. Registered in England No. 02061177. This market update may contain FTSE data. Source: FTSE International Limited (“FTSE”) FTSE 2019. “FTSE” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.
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