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European and UK stocks urged for diversification

Staff Writer4 April 2024

Investors have been urged to consider diversifying away from over-valued US stocks towards undervalued opportunities in European and UK stocks.

The advice has come from the UK-based chief executive of independent financial advisory and asset management firm, deVere, Nigel Green who has also pointed to what he calls “lurking concern’ around at the significant concentration of tech giants within the S&P500 index which he says raises question about market stability.

“With Big Tech companies comprising roughly a third of the index’s total market capitalization, there’s a growing acknowledgment of the potential risks posed by such sector concentration.”

​However, amidst these concerns, there’s a palpable sense of optimism regarding the prospects of other regions, namely European and UK stock markets.

​“We foresee a period of catch-up for these markets, fuelled by central banks’ intentions to cut rates, which would usher in a new economic cycle, and as a raft of key data is looking to turn positive for the region.

​“This anticipated shift is expected to be propelled by the substantial weight of economically-cyclical stocks prevalent in major European indices compared to the S&P500.”

​Among the indices poised for growth, the FTSE 100 stands out as particularly enticing.

​“Offering exposure to a diverse array of multinational corporations trading at relatively low valuations, the FTSE 100 presents an attractive opportunity for investors seeking global exposure.

​“Despite its association with the UK, only a fraction of the combined revenues of FTSE 100 companies originate within the UK itself, making it a truly global index poised to benefit from the resurgence of international markets.”

​While concerns persist regarding the valuation levels and sector concentration within the US stock market, the broader global landscape presents compelling opportunities for investors.

​Diversification remains a cornerstone of prudent investing, especially in times of heightened uncertainty.

​By spreading their investments across different regions and sectors, investors can mitigate risks associated with over reliance on any single market or industry. This not only provides a buffer against market downturns but also allows for participation in the growth potential of diverse economies around the world.

​“Investors should be including additional exposure to undervalued European and UK markets, topping up their portfolios at lower entry points, while best-positioning themselves against risk, before the valuations increase as the economic cycle shifts gears,” Green said.

Staff Writer

Staff Writer

Financial Newswire

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