almost 3 years ago • 1 min
UK stocks are trading at their cheapest valuation relative to the rest of the world since the 2008 financial crisis – offering a potential bargain, if history is any guide.
The chart shows the price-to-earnings ratio for the FTSE 350 Index of large and mid-sized British stocks, divided by the same measure for the MSCI World Index. This ratio has trended steadily downward since the Brexit referendum in June 2016, shown by the vertical green line.
The UK market is heavily weighted to financial and energy stocks, which have suffered in recent years as investors flocked to tech firms with the potential for world-beating profit growth. So many would argue it’s cheap for a reason.
The cheapest single stocks on the FTSE 350 at the moment include tobacco maker Imperial Brands, iron ore miner Ferrexpo, and software firm Micro Focus – each of which are trading at less that 6 times the coming year’s projected profits. Although, once again, you may find very good reasons behind these low valuations.
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