Trust me, I’m not an astrologer, but when the planets trapse across the sky in a once in a century or two manner, I nip off to my arcane volumes of velum to divine what it all means. According to those Romans, we men are claimed to always think about every day, a planetary procession means a huge change in top leadership. Crystal balls?
“Well Nero, old chap, ‘Vah! Ecce, Le Pen, Trump et Starmer’”
So in the U.K., my buddies the Tories have been punted from power by the celestial bodies, the electorate and the “new right” of the Reform party. The Reform party sealed the Conservatives fate by splitting the already shrunken Conservative vote so that nothing short of electoral devastation could be avoided for the then-ruling party. As is often the case, the election wasn’t won by the “Labour party” it was lost by the Conservatives. Wherever you look, electorates are simply fed up with their elected representatives, whom they feel have let them down horribly while parading fat and happy as a smug, out of touch elite. You can see it in France, you can sense it in the U.S. We are in a new post-pandemic era and a big changeover is under way with no obvious equilibrium in view.
So what does this mean for the U.K. market? After all, if we can make enough money there, we can up and go and leave all the conniptions behind, which appears to be a ‘thing’ with the U.K. with 8% less millionaires today than it had ten years ago.
Well, to recap, the U.K. market is flat on its backside after a generation of going nowhere. The FTSE is stagnant like the Nikkei 225 was after the Japanese property crash but without the rally at the end… yet.
It’s been a mess. Here is the chart to recap:
In a nutshell, the FTSE 100 market might just have broken out of a generational slumber. Twenty-five years of buy and hold will not have got you very far and it sums up in numbers and in this case a picture, the British malaise. The London market is on the ropes, doom is predicted and unusually actually creeping into reality. Yet that move above 8,000 is very enticing.
The reason is simple. Under the numbers of the FTSE 100 and its biggest listed shares, there is a very profitable disaster underway. It is the strip mining of the U.K. stock market by foreign companies (yes, you) and anyone that wants to buy $2 of U.S. value for $1 in the U.K.
The takeover wave has begun. Solid U.K. companies are so cheap that even U.S. fixated buyers cannot resist the invitation to feast. After the log jam of Covid cleared, the process of takeovers began and this year they arrived with almost a daily tally of takeover news. This is just the start. While the little FTSE 100 spike is promising, a portfolio of takeover candidates based on cheapness is up 20% and it seems to be just the start.
The change of government in the U.K. will further drive a broad market rally. This will be driven by novelty and the buzz of new faces in government and new promises yet to be broken that will spice up sentiment.
Meanwhile in France the drop on the shock outcome of the French election has now established a bottom of sorts. It’s the time to play on the long side in the CAC 40. For me, however, the U.K. market is so pregnant with opportunity my full attention is in U.K. value and income shares. It’s a contrarian paradise and likely a once in a lifetime opportunity and worth going all in with my crystal balls.
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