Podcast: Trust issues #4 – why are UK stocks so cheap?

One of the perennial themes of the past few years has been how UK equities have valuations that are so much lower compared to global peers. Investors in the UK market often frame this as a great buy opportunity. Others argue that the UK is cheap for a reason.

It’s a market filled with ‘old school’ sectors, like tobacco, mining and energy. These aren’t the sorts of industries that have performed well over the past decade and, even if value is having its moment in the sun, it’s hard to see that changing moving forward.

Time will tell as to who is right in this debate but to get a more nuanced picture of UK valuations, we spoke to Schroders UK small and mid-cap analyst Uzo Ekwue on the latest episode of Trust Issues.

In the episode, Uzo explains some of the market dynamics that have led major institutions to pull away from UK companies, which has likely driven valuations down. And perhaps counterintuitively, how smaller companies in the UK have delivered some of the best compounding returns over the past decade compared to global peers.