UK Stocks Underrepresented, Strategist Warns of Currency Risks

Vincent Deluard, head of global macro strategy at StoneX, shared his insights on UK stocks in a recent podcast. According to him, UK stocks are among the least represented in portfolios and asset classes worldwide.

Deluard pointed out that previously, about 50% of assets held by UK defined-benefit pension schemes were invested in domestic stocks. However, this percentage has dropped significantly to around 5%. This reduction is partly due to political instability, with the UK experiencing seven prime ministers in just one decade.

The strategist noted that the sell-off in UK assets following the Brexit referendum in June 2016 has largely run its course. He also observed that UK stocks have somewhat outperformed other regions and have shown better-than-expected economic indicators.

Deluard emphasized that he is not bullish on UK stocks, but rather suggests combining long positions with a short position in the euro against the Japanese yen. He believes the euro faces problems similar to those faced by the yen in the 2010s, requiring significant currency depreciation.