Punter Southall Wealth
Time for a Boris charm offensive?
Rory McPherson, Punter Southall Wealth’s Head of Investment Strategy, looks at the implications of the US presidential election result on UK assets.
It’s hard to dispute that Britain without Brexit would be a much better starting point for the Biden / Johnson relationship. While I don’t think it will drive a wedge between UK and US relations, it clearly sets the UK on the back foot. Boris will be forced to use all the charm he can muster. Fortunately, he has set off on the front foot with a warm congratulatory message to President Elect Biden and his Vice President Kamala Harris. Granted there have been some cross words between Boris and Biden historically, but they’ve never met, and Boris will be keen to get onside.
One would assume that Johnson would now be seeking a more united trade agreement with the EU which, in turn, would put the UK in a good place for a trade deal with the US. Biden is a fan of multilateralism and one would hope that Boris conveys the UK’s faith in big organisations like the WTO and the Paris climate change agreement.
Ultimately a Biden Presidency, built around higher stimulus and more harmonious trade deals, should see a broadening out of the equity market rally. A focus on building bridges outside of the US should also help other countries’ markets and shift the focus away from the handful of mega-cap growth stocks that have driven so much of the market performance of late.
This should be of a benefit to the UK stock market given its attractive valuation and more cyclical sector composition. Indeed, current valuations are such that individual names within the market are starting to be picked-off and bid for – recent examples being Royal Sun Alliance and William Hill.
To some extent, the presidential result doesn’t really matter too much for UK assets (due to their lower global value). Indeed, there is a strong argument for Biden actually acting as a catalyst to ignite their recovery via harmonious trade deals globally. However, this thesis very much hinges on a more collaborative relationship between Johnson and Biden, with the ball being firmly in Boris’ court. Establishing a strong relationship with the US – at least economically – will be crucial in ensuring that the UK and UK assets stay relevant in the increasingly turbulent global market.
Rory McPherson, Head of Investment Strategy
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