With the pound so low, how do we feel about buying US stocks? Plenty of us are up a healthy margin thanks to the fall but what to buy now? Do the long-term growth prospects of US tech titans outweigh the current premium paid? Or do you feel safer stocking up on ETFs like the S&P and NASDAQ bought in GBP?
Previously, I mainly focused on what I thought at the time were undervalued stocks at the time for example BlackStone & Disney a few months back and NASDAQ ETFs around christmas time, however due to the low pound & the US rally, I’m holding fire on buying US for a while.
Obvously, I think there are some US stocks with great long term growth however I do will priced out by the low pound, eqaully I think there are some great UK stocks which are undervalued due to the B word
Looking at history the Federal Reserve never just cuts rates once. If we are staring down the barrel of multiple interest rate cuts in the US then we could see the US dollar fall back to 2015 levels. This should one factored into any investment decision which is being made with a time horizon of less than 5 years.
Could you explain this a little more? I am interested regarding the pound falling and the likelihood of the dollar also creeping lower? Is that what is happening?
So are you saying that over the next 5 years the pound will get stronger, so I can buy more US stock for my money - but if I want to sell my US stock I will get less GBP?
5 years ago the dollar was 1.71 against the pound?
I don’t think anyone really knows. And you’ve not lost a thing until you decide to sell.
Personally, until Brexit is clearer (if it ever will be) I would be weary. In the case of a hard Brexit, or a hard left labour government, we are likely to see a sharp fall, probably followed by a slow and steady rise as market uncertainty gets less after Brexit, or prolonged uncertainty as a hard left labour government would tackle financial services, try to nationalise some industries and attempt to forcefully redistribute wealth.
What stocks do you think are undervalued in the UK. I also think UK stocks look more attractive now, mainly due to Brexit having a negative effect on the UK. I’ve had a good rally in US stocks the last few months.
My personal view is UK market is generally undervalued and political turmoil will ultimately pass. However I think that could be a long way off. I sold some of my UK shares to buy more US which have already outperformed them in the short term.
Obviously not providing investment advice, but companies with a good cashflow, high P/E Ratio and strong brand recognition, offering a day to day low end product tick the box for me i.e Greggs & Barr etc
Of course FTSE ETFs help spread your coverage and avoid pinning you down on one sector, as a hard (or any form of) brexit could have surprise outcomes. However please do your own research as I could be more wrong than Woodford.
Curious why you would want a high P/E ratio if you are looking for undervalued stocks?
You’ve caught me out, I started listing my investment strategy rather than hunting for undervalued stock. I blame friday.
But saying that a high P/E with a high rate of growth could still hint at a stock being undervalued
Cheers, I was just looking for companies that I could research. I think Greggs stock has done a bit too well recently for my liking, so doesn’t seem as interesting as an investment at the mo.
I’m holding AstraZeneca and Ocado. I think companies that have strong international business may do well.
*Just my opinion, not advice etc…
That would assume the UK doesn’t follow suit and cut rates. Brexit could be consequential such that rate cuts might be required to help aid growth.
I fully expect rates to be cut to near zero in the case of a hard Brexit, but that may aid the pound. Somewhat.
The difference is the UK barely has any more room to cut
On a relative basis the US is more attractive (the interest rate differential too). USD more so in bad times.
Sure but there is a lower bound to what a Central Bank can achieve with interest rates. Most people in the UK have fixed rate mortgages and so a cut from 0.75% down really will not much of an effect. The US, on the other hand, can slash 200 basis points in quick succession. It is all relative.
Surely then we want to invest outside the UK, for if there’s a hard Brexit the pound will drop even more and our investment will be worth more gbp, if by some miracle anything else happens, assuming it’s a good something else we should just see a steady rise and decide to sell are US stocks and invest more in the British economy.
Isn’t this all assuming there won’t be a economic downturn anywhere apart from the UK? America is looking dodgy and the eurozone isn’t much better
If sterling falls will they increase interest rates to boost it or lower them to boost growth. I suspect that’s why the Fed are so reluctant to cut theirs