Stock Market Yields

When the vote for Brexit took place in June 2016, many were predicting doom and gloom and whilst we saw the value of Pound Sterling fall, the stock market rallied as investors bought into UK companies to take advantage of the lower Sterling rate.

Although Brexit is still not finalised and we have experienced some volatility as a result of the uncertainty, the UK stock market is currently yielding over 4% per annum, an absolute level of yield rarely seen outside of recessions and historically predicts a ten year boom! This suggests that much of the gloom surrounding no-deal is already reflected in share prices. 

This presents investors with a compelling income opportunity especially compared to cash accounts (many of which have interest rates below 2%) and Government Bond yields of which many are currently under 1%. In many cases companies’ shares are yielding substantially more than their own corporate bonds. 

Our own Discretionary Managed Investments and Pensions at Philip J Milton & Company Plc are yielding between 4% – 5.25% per annum providing our investors with a very healthy income and of course for those who do not need the income this can be reinvested to increase the growth potential.

Of course, we have experienced slowing economic growth, but long-term investors can take heart from the fact that over the last three decades investment in the UK stock market has never produced a negative return over the following ten years when the initial yield has been over 4%. However, time will tell if history is set to repeat itself.

The fortunes of the UK stock market should not be confused with that of the UK economy. Barely a third of the profits of UK listed companies are derived in the UK and half of all their dividends are declared in either Dollars or Euros. 

If you do wish to consider stock market investments, please contact the office to speak to one of our highly qualified Advisers who will be able to assist you further.

Risk Warning

The value of stock market investments and any income from them may fall as well as rise and investors may not get back the amount originally invested. Yield figures may vary and are not guaranteed. It is advisable to hold these investments for a minimum of five to ten years, over which periods stock market returns have shown themselves to be historically superior and broadly predictable through both good and bad times. Past performance should not be seen as an indication of future performance.