EdenTree's Harris: The devaluation conundrum

clock • 3 min read

The impact of the sharp fall in sterling post the EU referendum against a range of currencies had some initially predictable effects on UK equity markets.

Large-cap stocks, with on average 70% of earnings overseas, were mechanically rerated to take account of 'cheaper' valuations. For the first year since the financial crisis mid caps saw significant underperformance, a direct correlation of the much lower percentage of lower overseas earnings and lower commodity exposure.  The post crisis premium to large caps has now disappeared. Now that these effects have washed through there are a number of important follow-on aspects for investors to appreciate in asset allocation and sector preferences. The rerating of large-cap stocks, driv...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

Trustpilot