I wanted to follow up on an excellent article written by Blair Campbell of our Guernsey team, where he wrote about opportunities in the UK (Click here to view).

Brexit has certainly been hanging over policy makers and corporate decision makers in the UK over the last 3 years. Since the referendum in 2016, the economic data in the UK has broadly surprised to the upside. (see chart below). This was most prominent immediately after the referendum as commentators factored in huge uncertainty while in reality the economy held up pretty well.

In addition the economy outperformed the consensus significantly during Q1 of this year, put down to stock piling ahead of the anticipated departure date on 29th March, and then fell off a cliff in Q2 as Brexit’s postponement caused more uncertainty.


Citigroup Economic Surprise Index – UK

Source: Bloomberg


As a result of all of this, markets have demanded more risk premium for UK assets. Having rallied approximately 6% in Q1, GBP trade weighted index has fallen back to near its old lows seen in September 2016 in the aftermath of the referendum result. Having held steady in Q1 in anticipation of a more benign economic outlook, 10 year UK gilt yields have fallen by 50 basis points in the last 3 months. In addition, the FTSE 250, which gives a better reflection of the fortunes of the UK domestic economy, has underperformed the broader market by about 5% over the last 12 months. On a global basis the UK has also significantly underperformed as the chart below from Invesco demonstrates.


Valuation relative to 20 year average – UK vs RoW: Widespread Opportunities in UK

Source: Invesco, DataStream & Panmure Gordan


This chart takes the average valuation of the UK and Rest of the World equity markets relative to the 20 year average and measures the standard deviation from that average. As we can see, not only is the overall UK market significantly under-valued but all the sectors are too. The relative undervaluation is of course much more pronounced when plotted against the US stock market.

The point I am trying to make here is that, at some point, we would expect the Brexit uncertainties to be resolved and much of the bad news, including the possibility of a ‘no deal’ Brexit, is discounted into UK assets. Consequently, in our multi asset Funds we have been increasing our exposure to domestic UK assets which, on an absolute and relative basis, look to be pricing in a record period of future economic gloom. While this could take time to pan out, investors in the domestic sector are being paid a 5% dividend while they wait.



MitonOptimal UK Limited
Royal Mead
Railway Place


t: +44 (0) 1225 632 250
f: +44 (0) 1225 439 442

Regulatory Information

MitonOptimal UK Limited is part of the MitonOptimal group of companies. Registered in England and Wales No. 09138865. Authorised and regulated by the Financial Conduct Authority.

Send this to a friend

Terms & Conditions


By using or accessing any part of our website, aside from the Terms and Conditions page, you agree to be legally bound by those terms and conditions. We may amend these terms and conditions at any time without notice. Your continued use of our website following any change will constitute your acceptance of such change. Our full terms and conditions can be found at https://www.mitonoptimal.com/uk/terms-conditions/

Regulatory Information

The MitonOptimal Group (“MitonOptimal”) of companies is authorised and regulated in their respective jurisdictions, as required by law. For further details, you may visit the regional sites via https://www.mitonoptimal.com.

MitonOptimal UK Limited is part of the MitonOptimal group of companies. MitonOptimal UK Limited is registered in England and Wales No. 09138865. Authorised and regulated by the Financial Conduct Authority.

Risk Warning

Potential investors should be aware that our models and funds may make investments in equities, bonds, cash, commodities alternative strategies and commercial property. Investors should be aware that there is no guarantee that investments will go up.  Past performance is no guide as to future performance. As the price of units and the amount of income distributed or accumulated may go down as well as up, the Manager has no obligation to redeem units at the subscription price originally paid. If you are in any doubt about the content of these terms and conditions, you should not enter the site and consult your stockbroker, bank manager, solicitor, accountant or professional investment advisors.

If you have any questions or concerns about our website please email us at [email protected].

Please indicate below, whether you accept/do not accept our terms and conditions of use.