Contrast this with, say, France and Germany and we currently look like the political poster child. I had forgotten until Michel Barnier was appointed last week that France had been without a permanent prime minister for more than two months.
Knight also highlights real wage growth in the UK, as does the UK equity team at Janus — this probably does not take account of the recent public sector pay announcements, though on the flip side there are tax rises on the way that might balance these out.
I speak to a wide variety of managers, but positivity on the UK has been fairly relentless during the past year or so — Premier Miton fund manager Gervais Williams thinks the UK will be the best-performing market over the next 20 years. Now, he said that in late 2023, before the recent artificial intelligence boom, but even at that point tech was motoring and the UK clearly was not a leader.
The UK is still seen as old economy, whether that is true or not is debatable, but in another interesting stat from Janus it states that the country typically outperforms in times of higher rates.
In the 1970s, this outperformance was 3.9 per cent a year, and 3.7 per cent in the 1980s. Even the Britpop-fuelled 1990s saw 1.9 per cent outperformance — can we look back in anger?
Alongside share buybacks, the other way of returning capital to investors is via dividends, and it goes without saying the UK has a firmly entrenched payout culture.
That same helpful asset manager, let us call them JH this time, authors a global dividend index that showed a small pickup in UK dividends in the first quarter of 2024 to $15.2bn (ex-specials). Interestingly, the high number of share buybacks hides an even stronger picture of underlying dividend growth.
Sensible dividend-paying businesses
There is little to excite in the UK market — there is no Nvidia, no Microsoft, and the reality is there never will be as anything interesting either gets bought out or relists in the US.
But there is a whole raft of sensible, cash flow-generating, dividend-paying businesses that are cheap today because they do not fit in with the market narrative.
Cheap today, and cheap on historical standards. They are not AI, but surely that is a good thing. It does not matter whether you are looking for large, mid or small companies, there are opportunities across the scale.
So why buy UK? Valuation, dividends, share buybacks, stable politics. And the second point is key in my view, as with a healthy dividend yield you are being paid nicely to be patient.
