According to Futubull Finance, a well-known fund manager who manages a UK fund worth about £1.6 billion ($2 billion) predicts that regardless of the outcome of the UK election, the UK stock market will experience a significant recovery. The fund manager's fund outperformed 86% of peers globally in 2024. This latest prediction means that not only is the US stock market led by technology giants such as Nvidia attractive to global investors, but the UK stock market, which focuses on undervalued blue-chip and value stocks, is also likely to be favored by institutions and individual investors.

James Lowen, co-fund manager of JOHCM UK Equity Income Fund, said that the continuous improvement of the UK's macroeconomics and the easing of political uncertainty could boost the UK stock market's sustained undervalued valuation of blue-chip and value stocks. The fund manager expects that the long-term outlook in the next 12 to 24 months will see a rise of 50% to 100% in some of the large-cap stocks he covers, while some small-cap stocks may see a surge of up to 150%.

"The early election in the UK is positive because it resolves some issues and accelerates our exit from the long-term"uncertain" period," Loewen said in an interview."In the eyes of global investors, the bright prospects of the UK's politics will also help the overall UK stock market."

This experienced fund manager's strategy of seeking undervalued and cheap targets in UK financial and cyclical stocks has paid off. He said the overall valuation of UK financial stocks is much lower than that of well-known Wall Street counterparts in the US. He owns many well-known UK financial companies including Barclays Plc, NatWest Group Plc, Standard Chartered Plc and insurance company Aviva Plc. He said that the capital allocation clarity of the entire industry has been improved, and the management team has been streamlining the business.

Loewen said, "I think these stocks are severely undervalued, and even if they rise by 10%, it does not mean it is the right choice to sell them." According to the latest statistics from the institution, the full-line rise of UK bank stocks and the overall recovery trend of trading matching are the main driving forces for the excellent performance of the UK fund he manages, helping the fund outperform 86% of fund managers globally this year.

Loewen's extremely optimistic view of the future trend of the UK stock market is in sharp contrast to the views of many Wall Street strategists. Wall Street strategists generally predict that the benchmark index of the UK stock market, the FTSE 100 Index, will be about 4% lower than the current level at the end of this year.

In the years of political turmoil after the 2016 Brexit referendum, the UK stock market has lagged behind its European counterparts and the US stock market, which has constantly reached new highs. The market chaos caused by the "Mini Budget" policy launched by former UK Prime Minister Liz Truss in September 2022 has further exacerbated the poor performance of the stock market. However, the positive side is that the situation in the UK, whether in politics or the economy, has been improving. Especially the UK economy, which has been baptized by high inflation in recent years, is exceeding expectations. The weight of the industry that is cheaper and more value-oriented in the UK stock market is increasing, which is good news. The FTSE 100 Index rose 5.9% in 2024, close to the 8.7 % increase in the benchmark index of European blue-chip stocks, the Stoxx 50 index.

Market observers have become more optimistic. Strategists from HSBC recently upgraded their overall rating of UK stocks to "buy," saying it is time for investors to increase their allocation in the region, and global asset management giant Schroders has also raised its positive view of the UK stock market.

At the same time, in the midst of political turmoil in French politics, the total market value of the French stock market has shrunk significantly, and London has regained the crown of "Europe's largest stock market."

As early as November 2022, the Brexit storm combined with sustained high inflation had a heavy impact on the UK economy, and the UK stock market once fell sharply, allowing the French stock market to take the throne of "Europe's largest stock market" from the UK stock market. However, less than two years later, political turmoil in France dragged down the market capitalization of its own stock market, leading it to return the title of "Europe's largest stock market" to the UK.

Due to low prices and valuations, there has been a wave of large-scale mergers and acquisitions in the UK stock market, especially with the MSCI UK Index trading at about 40% lower than the MSCI World Index. According to the latest data compiled by institutions, public M&A transactions targeting UK companies have reached as high as $37 billion in 2024, including pending and completed transactions, up about 68% from the same period last year.

Luowen and his colleague Clive Beagles recently joined the ranks of institutions such as Centrica Plc and Morgan Advanced Materials Plc, after making significant profits from bidding wars for investment funds such as Hipgnosis Songs Fund Ltd. (which will be sold to Blackstone Group).

From a valuation perspective, the prices and valuations of all industries in the UK are discounted beyond normal levels compared to industry benchmarks in the US stock market. At the same time, the Federal Reserve's official forecast of maintaining high interest rates for a longer period of time also favors so-called "value stocks", which account for the majority of the weight in the UK stock market. What is more noteworthy is that British commodity companies and banks have announced the distribution of "unusual" dividends and launched share buyback programs beyond expectations. For a stock market that has performed poorly in the long term, these may signal a complete change in its destiny.

UK stock market heavyweight Shell (SHEL.US) and BP (BP.US) plan to buy back more than $5 billion worth of stock. HSBC Holdings and Standard Chartered Bank have also recently announced buyback plans. The extreme optimism of leading British companies in terms of share buybacks may continue to provide a strong "long-term bull market catalyst" for the UK stock market. This also represents a vote of confidence from the boards of listed companies that the operating scale of the company can provide enough cash flow to pay for share buybacks to improve shareholder return.

In addition, a series of large-scale corporate mergers and acquisitions and the Bank of England's more dovish commentary on interest rate cuts have greatly boosted investor interest in the relatively small UK stock market.