With New Uk Prime Minister Stocks Become Attractive

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With New Uk Prime Minister Stocks Become Attractive

With New UK Prime Minister, Stocks Become Attractive, But Sterling Is Still Vulnerable

It seems that a game is going on in the United Kingdom as they elect a new Prime Minister every few months. The newest prime minister of the United Kingdom is Liz Truss, and who knows how long she will stay in the seat? But for now, the political uncertainty has reduced a little, but it will not be enough to help the Sterling.

Right now, GBP is at the lowest level against its rival US dollars - Such levels were not seen since 1985, which highlights the severity of the situation. Just this year alone, the fall of GBP is around 15% which is not a small value among the currencies.

However, the UK stocks have remained resilient and even performed better than the previous year. For 2022, the UK stocks were up by 0.5% only - But when you compare it with the -17.5% return of the global stocks, this looks like a great performance.

The analysts at UBS believe this extraordinary performance of the UK equities will continue in the near future as well.

Weaker Pound Will Boost the Earnings Growth

Right now, the government policies do not have much that can support the strengthening of the Pound (GBP). In fact, the budget deficit is widening, which will only put additional pressure on the Pound. The new prime minister is more interested in higher spending and has already proposed tax cuts.

Once again, these things will not support the Pound Sterling, but it will be good news for the equities. Maybe that's one of the reasons why the UK equities have performed so well against the global stocks.

The new UK prime minister is also going to introduce a package that will reduce the cost of energy bills in the United Kingdom.

As for inflation, there is very little chance of any decrease in energy prices (natural gas and oil). On top of that, there are also multiple supply-chain problems that are making the prices higher. Together, these factors will continue to push inflation higher in the UK.

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