From a financial perspective, we are coming off the back of one of the fastest market falls in UK history, but also one of its fastest recoveries.

Last November, for example, was the fastest-growing month we’ve had since 1989! So what does that mean for us as we move into 2021?

In this blog, I will be sharing my outlook on the UK market for 2021 and providing you with some key factors which may present investors with a lot of opportunities.

The UK market is still very cheap

When I look at the markets, I mostly think in terms of what’s good value. That means I’m looking at what’s cheap, what’s expensive, what I want to buy and what I want to avoid.

And the overwhelming reality we are facing at the moment is that the UK market is still very cheap, even with the recovery it had at the end of 2020. When you compare it to its counterparts in the developed world, like America, China and Japan, all of them have totally recovered from the effects of COVID-19, but the UK still has some way to go yet. 

Mostly this was down to the uncertainty caused by Brexit which has held us back.

But now, almost all of that uncertainty has been removed with the deal being struck by Boris Johnson and the EU. Of course, there are still some things to iron out, but the deal being struck was a good lift to the uncertainty.

Personally, I don’t really care which way it goes. I just want the uncertainty to disappear from the market, which is what looks to have happened in December. Now we can all move on with our lives, and the UK market may start to see a further recovery.

But even now, with certainty looking like it has been restored, we’re still the cheapest of the developed markets, and that presents a big opportunity.

Things are looking good for the UK market

This is because the recovery we had in November, which may only be a third (or even half) of what’s due to come to us, means that the UK market represents great value at the moment.

Also, as we always say here at Applewood Independent, change brings opportunity, and we’ve certainly had a lot of change recently. This means whichever way this Brexit deal pans out, the best fund managers are the ones who are buying cheap shares to make money from, and a lot of the ones we have been speaking to have seen the UK as the best place to find these shares.

In fact, quite a few are under the impression that the UK market is at one of the best values they have seen in decades!

So, potentially, things are looking good for the UK market. 

Opportunities abroad

However, that’s not to say there aren’t opportunities elsewhere in the world. For example, big US technology companies that invariably fall into either American or global funds, could also represent great value.

The technology sector is still continuing to take off, and I think it will keep going up for a while as lockdown continues and we are still forced to use technology more and more. 

So, there are still some legs in the tech-dominated American market yet, and with things being shaken up over there with a new administration, that change could represent another opportunity in itself. 

The UK may become less of a risk

As we look into 2021, I think the UK will compare favourably to the US in the near future. It may well present less of a risk to investors versus the US which is a good sign.

But apart from the financial details, let’s look at the positives of 2021. We’re going to have more vaccines, which hopefully means fewer deaths and lockdown should end soon (fingers crossed).

These changes should hopefully help with various issues related to COVID-19 and lockdown, such as mental health issues, and we should be able to see our loved ones more often which will be a boost for everyone.

So things are looking up! 

From the investment outlook, it looks very positive. Things are cheap which means they should be good value, and if our portfolios can come home with above-average performance, then happy days! 

I hope this was useful. Feel free to email me directly for any further information at alex@applewoodindependent.co.uk.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of an investment can go down as well as up. Past performance is not a guide to future performance.