Author: Tim Sharp
Researcher: Jack Williams
Published: December 21, 2023
The charts published show three indices that represent markets on a global, U.S and U.K scale. The red line represents the current price of the index (MSCI), while the blue line is the Blue Angels Implied Price (calculated using forward earnings multiplied by forward P/Es).
Looking at the first chart, you can see on a global scale, the market trades around a 15.25x multiple compared to the USA which trades at a premium of over 17x.
The chart below shows the U.K trading at a steep discount in comparison to the general global market and even more so to the U.S market. UK MSCI currently trades around a 6x multiple, almost 300% lower than the USA and 250% below the general global market.
One of the main reasons for this has been the high percentage of cyclical companies that make up the index. With a large proportion of constituents in the Banking space or the Energy sector, traditionally with lower valuations than of those that comprise the likes of the US indices which include a wider range of growth names.
That being said, this can be both a positive and negative for investors as the market has grown at a slower rate. We have seen the U.K market much more resiliant to the kind of market volatility seen this year in the USA. Over the past year, the FTSE has returned a positive 2.06% compared to the S&P500 in the U.S which has seen declines of -15% over the past 12 months.
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