I just landed in the U.K. and it's amazing that everything seems to be where it was the last time I visited. I had expected to see a Brexit Canyon in the city or a series of Les Miz-style Brexit barricades manned by deluded millennials in the middle of Trafalgar Square, but, no, things seem to be just about the same.
That's the point. Britain isn't going anywhere. It just drove me absolutely bananas to read the ignorant, reactionary op-ed anti-Brexit pieces in the U.S. mainstream media on Brexit on the Friday after the "leave" vote and in the days that followed. Unlike those misinformed pontificators I have actually lived in Britain -- five years in total, not residing in the U.K. now but remembering what I loved about it -- and I can say one thing for certain: Britain is by far the most well-governed, business-friendly state in Europe. It's not even close, actually. In my opinion, the countries that come closest would be Norway and Switzerland, and, in case you haven't noticed, neither is in the European Union.
As we saw with this week's seamless transition in the prime minister's post from David Cameron to Theresa May, Britain's democracy is functioning quite well, and it's probably the safest in Europe as well. Last night's horrific attacks in Nice, France, show once again the influence of jihadist terror on European populations, and while the U.K. has had its own scrapes with Islamic terror -- most notably the 7/7 attacks in 2005 -- it is a country where its two largest cities have Muslim mayors and where many groups have been integration into a larger society.
Britain's economy is fundamentally sound and the Bank of England's decision not to push the panic button and cut rates at yesterday's meeting supported both the sterling and the stock market. The BOE did signal easing would be coming in August and the U.K. property market had been quite frothy, so I think a small deceleration in growth -- a Brexit breather, not a Brexit Armageddon -- would actually serve the British economy well.
So, Britain is fine and the FTSE 100, though down slightly today, has recovered more than 10% from the Brexit bottom. If you missed the Brexit bounce, I would caution that the total return party is not over. With the S&P 500 trading at an all-time high the yield once again is dropping and, according to multpl.com, closed yesterday at a minuscule 2.03%. That's not a lot to grab on to and makes us all dependent on capital gains to drive returns.
Owing to the prevalence of major integrated oil giants BP (BP) and Royal Dutch Shell (RDS.A) -- oil and gas holds the highest sector weighting in the Footsie at 14.5% -- and other generous dividend payers such as British American Tobacco (BTI) and GlaxoSmithKline (GSK) , the FTSE 100 is a cash machine, relative to the S&P 500, anyway.
As of June 30, the FTSE 100's yield was 3.84%. Wow! I remember when my checking account yielded that much ... and when you could get a Hershey bar for a nickel.
All joking aside, 3.84% is a very strong number, and if you want a piece of that strong yield, the Recon Capital FTSE 100 ETF (UK) is probably a good way to play it. I'm watching the S&P 500 blow through all-time highs on a daily basis -- and blow through 18.0x this year's estimated earnings per share -- and thinking this has to correct itself soon and there has to be more value elsewhere. I believe the FTSE 100 is one of those places.