Is now the time for me to go bargain hunting on UK share markets? If analysis from JP Morgan is anything to go by, the answer could be yes.
After years of lagging other global stocks, the US bank believes that British stocks are now trading at “near record cheap” levels. It notes that since the 2016 Brexit referendum, UK shares have underperformed US stocks by a whopping 50%, while eurozone equities have beaten their British counterparts by a meaty 24%.
As a consequence, British shares are now trading at a “record discount” to those North American and European shares. JP Morgan says that this is the case on both a price-to-earnings and price-to-book basis.
UK share prices to shoot higher?
Lagging UK share prices mean that JP Morgan has changed its stance on British stocks to “overweight” from “neutral”. This means that it expects London-listed equities to outperform their foreign counterparts over the next 18 months as they rise from a low base.
“While we are bullish about the direction of the global equity markets… a large chunk of the up-move [has] already materialised,” JP Morgan said. It added that as a result, “UK equity could be more resilient against a global equity backdrop which doesn’t show as dramatic upward moves than seen before.”
Finally, JP Morgan said that it expects the FTSE 100 to perform particularly strongly looking ahead amid a predicted weakening in sterling. It reckons too that UK shares would prove resilient to forthcoming Bank of England interest rate rises.
2 FTSE 100 bargains on my radar
Writers here at The Motley Fool (including myself) spend a lot of time explaining why now is a great time to go hunting for dirt-cheap UK shares. While the Dow Jones and S&P 500 continue to punch regular record highs, the FTSE 100 remains locked in a tight range around the 7,300 points mark. And there are plenty of bargains on the Footsie that I’m personally considering loading up on today.
ITV, for example, provides the sort of value I think makes it too good for me to miss. As well as trading on a price-to-earnings (P/E) ratio of 8 times for 2022 the broadcaster boasts a 4.8% dividend yield today. It’s true that advertising revenues could slump again if the broader economy cools sharply. But I’d still buy it because of its massive investment in the fast-growing video-on-demand segment and the ambitious global growth plans it has for its ITV Studios production arm.
I think the Aviva share price also offers brilliant all-round value right now. This FTSE 100 stock trades on a P/E ratio of 9 times for 2022 and sports a 6.3% dividend yield. Insurers like this might face significant bills going forwards due to climate change. But I think the firm’s immense brand power could help to offset this problem. Like ITV, I’d happily buy Aviva for my shares portfolio today.