The FTSE 100 remains in touching distance of record highs but there is still considerable uncertainty over the Brexit process and the looming issue of a UK interest rate rise – possibly as early as next month (2 Nov).

Canaccord Genuity says investors should consider the relative underperformance of UK shares against other global benchmarks when considering where the market is headed next.

The Canaccord team notes the FTSE All-Share is only up by 12% over the last 12 months against the US S&P 500 up 21% and the Euro Stoxx up 23% despite the benefit from weaker sterling and the strong performance of mining stocks which are more heavily represented in the UK than elsewhere.

They suggest this situation implies there is already a high level of political/economic risk embedded within both the broad UK market, and the mid-market specifically.

‘With political risk not obviously lower in other industrial markets, we don’t see this underperformance as merited’.

Overall, they see the UK market as being in ‘good health’ with solid performance, a decent economic backdrop and valuations a little on the high side but ‘within normal ranges’.

The main risks identified are a deterioration of the political situation and weak growth in wages.

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