Global Insight 2024 Outlook: United Kingdom

By Frédérique Carrier, Thomas McGarrity, CFA, and Rufaro Chiriseri, CFA Subdued economic growth and troublingly persistent inflation suggest the UK may well fall victim to stagflation in 2024 if the labour market deteriorates further. The Bank of England is unlikely to be willing to cut interest rates before the second half of the year, in our view. Despite the unpalatable macroeconomic backdrop, we see opportunities for patient investors. UK equities are attractively valued, largely unloved, and offer defensive characteristics. As for UK bonds, we have a bias towards adding further to Gilts and increasing duration in the near term. UK equities The UK’s challenges continue but its unloved equities offer opportunities. A changing of the guard? The next UK general election is likely to be held in 2024. Given that the traditionally left-wing Labour Party has consistently held a large lead in the polls for more than a year, it is worth considering how the party would govern once in power. Under its leader Sir Keir Starmer, Labour has changed its spots. The policies of its radical left-wing faction, such as imposing higher taxes on high earners and nationalizing utilities, have been abandoned. The party seems to have transitioned towards the center and has markedly improved ties with the corporate sector. Overall, we do not think a Labour win would incite a strong negative reaction in financial markets. The Labour Party has outperformed the Conservatives for two years YouGov Westminster Voting Intention Tracker YouGov Westminster Voting Intention Tracker The line chart shows the voting intentions in the UK for the two main political parties: the Conservatives and Labour. Since November 2021, Labour has gained an advantage. The gap has markedly widened since September 2022, and Labour now commands 47% of the vote intentions compared to 23% for the Conservatives. […]

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