The very last time the uk stock market ended up being because low priced as today compared to the worldwide average had been almost 50 years ago.

It had been 1973 and britain was reeling from an oil surprise and worldwide financial dislocation, combined with attacks, gas shortages and power cuts. i remember having to do my research by candlelight.

Can britains economic outlook possibly be as bad today? or has confidence in united kingdom stocks dropped thus far that the market is really undervalued, with deals for all prepared to brave the news headlines?

Demonstrably,the economic climate is within recession, aided by the imf forecasting in a declaration the other day a 10.4 % plunge in gross domestic item this season, a partial data recovery of only 5.7 % in 2021, and also the possibility of production remaining 3-6 % below pre-pandemic levels.

The pandemic casts a shadow over various other nations also, as may the disputed united states presidential election if uncertainty paralyses plan.

Nevertheless growth figures place the uk among the list of weaker developed economies. while gdp numbers usually do not straight figure out company profits, its a hardcore environment, notably for retailers and restaurant chains. and their foreign counterparts do not have to deal with brexit.

Little wonder that ft all-share index is still around 20 per cent down on 2020, while international indices are up, albeit marginally.as the chart reveals, uk sharesare at their most affordable valuation relative to the msci world typical since the very early 1970s, as measured by a variety of price/earnings, price/dividend and price-to-book ratios.

Uk vs msci world v2

Yet still, with a lot of the downside in the cost, could there be an upside? recently, the united kingdom stock exchange hardly reacted to boris johnsons one-month lockdown. if it didnt knock shares possibly we are close to the flooring, limiting investors risks.

Contrarian investment supervisors tend to be buying. ian lance of rwc partners, a good investment company, states:many men and women do the wrong thing: they panic and offer once the marketplace is down and buy later on when it features recovered. its psychologically extremely tough to accomplish just the right thing.

He could be, including, perhaps not put-off by marks and spencers announcement this week of itsfirst-ever half-year reduction. he contends investors tend to be overlooking the companys fast-growing food business, with an in-house procedure well worth an estimated 2.5bn and a 1bn share in on the web operator ocado. thats 3.5bn for an organization with a market cap of just 2bn.

Then there's natwest, the government-controlled lender, that will be so carefully run it boasts a tier one capital proportion of 18 per cent, the full 4-5 percentage points abovetarget. thats 31bn in cash a big crisis buffer and a lavish fund for funding future dividends, as soon as regulators allow repayments to restart. mr lance views a yield of 10 per cent in possibility.

He also likes royal mail.while bears concentrate on the lossmakers struggle to streamline its sprawling distribution solutions, he looks to its fast-growing parcels company. he determines that gls, the companys eu-based parcels-only subsidiary, is really worth 2.2bn or pretty much all the 2.5bn marketplace capitalisation.

Much more generally, it is really worth remembering that british listed companies earn most profit overseas 70 % for the ftse 100 groups dominating the market, particularly gas and oil teams. while it are off favour for ecological and commercial reasons, bp yields a full 9 %, even with a dividend slashed.

There might be worth in smaller worldwide companies. rob burgeman, financial investment supervisor at brewin dolphin, the wide range manager, indicates ashtead, an industrial gear tenant that creates a whopping 85 percent of profits in america. it may reap the benefits of any fiscal stimulation coming following the presidential election.

But that stated, the uk marketplace is affected with significant weakness going beyond the pandemic and brexit a shortage of tech stocks. the biggest supply of international value creation in the last ten years is basically absent, driving fund supervisors to check abroad, mainly toward us.

Peter mclean, analysis director at wide range manager stonehage fleming, claims the uks share associated with the companies advised equities profile was slashed quite materially 36 months ago as money had been redirected to the us in general and tech in particular. the united kingdom share now stands at 5-7 percent, compared to 40-50 per cent a decade ago. even though post-pandemic data recovery comes to the uk, this share allocation wont modification materially.

Thats not to ignore britains powerful world-class organizations. unilever, glaxosmithkline and astrazeneca, including, are profiting from pandemic-driven health and health investing, since are diageo in beverages and hsbc in economic solutions. however they dont make up for the weak technology sector.

1 / 2 a century after 1973, we might not be in short supply of electrical energy. but we're able to do with some more brilliant sparks in the currency markets.

Stefan wagstyl is editor of ft money. email: twitter: