This could be the catalyst for ‘unloved’ UK market in 2024 | Summary and Q&A

TL;DR

Despite pessimism about the UK Equity Market entering a recession in 2024, there is potential for cautious optimism as the market's valuations are relatively low, making it a potentially attractive investment opportunity.

Key Insights

• 😘 Predictions of a UK Equity Market recession in 2024 are met with caution but also the potential for attractive investment opportunities due to low valuations.
• 😷 The US economy's strength in recent years could mask a potential recession in 2024, which would have global implications.
• 😘 The UK Market's low valuations and potential for earnings recovery may attract investors, especially if there is a correction in the US market.

Transcript

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Questions & Answers

Q: What are the reasons to be cautious about the UK Equity Market in 2024?

The main reason for caution is the possibility of a recession, which could have a significant impact on the global economy, including the UK stock market. Additionally, if the US economy enters a recession, it would further affect the UK market due to its close ties with the US.

Q: How could the UK Market potentially make gains even in a recession?

The UK Market's low valuations, with a price-to-earnings ratio of about 10, provide room for potential growth. Even if there is a recession, the market could see a recovery, and investors may be willing to pay higher than average price-to-earnings ratios as the economy bounces back.

Q: What factors could attract investors back to the UK Market?

If there is a correction in the US market, it could serve as a catalyst for investors to reconsider UK market valuations. As the US market has absorbed capital from other markets, including the UK, a change in sentiment towards valuations rather than momentum could lead to increased investment in the UK.

Q: How has the Fidelity Special Values Investment Trust performed in the rising interest rate environment?

The Fidelity Special Values Investment Trust has performed well over the past three years, both relative to other investments and absolute performance. It has even outperformed the NASDAQ. This suggests that the value style of investing, followed by the trust, can thrive in a rising interest rate environment.

Summary & Key Takeaways

• There is pessimism surrounding the UK Equity Market entering a recession in 2024, but the predictions from last year did not come true.

• The US economy has been surprisingly strong, but there is a risk of a recession in 2024, which would have a global impact.

• The UK Market's low valuations compared to the US market could provide an opportunity for potential growth, even in the face of a recession.