Where in the World Should you Invest?

Which equity market offers ISA investors the best chance of healthy returns? We examine the prospects for developed and emerging markets alike

Nutmeg 10 April, 2014 | 10:00AM

This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Shaun Port, CIO of Nutmeg outlines is outlook for global stock markets for ISA investors.

UK

The UK economic recovery has surprise many commentators over the past six months, seeing the one of the greatest upgrades to economic forecasts in the world.  We think investors shouldn’t overlook the UK market when building their portfolio, not least because investing in UK stocks involves no currency risk.  We prefer mid-sized companies, which have a greater focus on the domestic market than the FTSE 100.  International buyers of the UK market have become even more important - US investors bought a record $97bn of UK stocks in 2013 – while UK pensions schemes continue to dump stocks.  As a result, investors should be somewhat watchful of the emergence of political risk in the UK as we get closer to the Scottish Independence vote in September and the general election in May 2015, which spook overseas buyers of UK stocks. 

US

On many measures the US stock markets look expensive compared to history, but we still think investors should have some exposure.  Despite a very strong gain in 2013, we would also hold exposure to a diverse range of smaller companies, to benefit from improving domestic growth.  Arguably the US market is safer than other stocks.  In the majority of the 15 sell-offs we have experienced since 2009 – when the market dropped by 5% or more – US stocks have fallen by less than elsewhere.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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