UK shares: is there a reckoning coming?

On one hand, UK shares can look like good value compared to many US stocks right now.

On the other hand, many UK shares may look overvalued in objective terms.

This year has seen the flagship FTSE 100 index of leading shares has repeatedly hit new all-time highs. Yet the British economy is looking sluggish.

Could it be the case that, after a period of strong performance, a weak economic outlook starts to weigh more heavily on the UK stock market?

Limited drivers for growth

I think it could.

After all, markets can only defy economic gravity for so long (albeit that can sometimes be quite long!)

While UK shares as a whole may not currently look overvalued, what I am not seeing is clear drivers to help keep pushing them upwards, given a fairly weak economic outlook.

As some investors move money out of the US due to political uncertainty and look to redeploy it in other markets, UK shares could benefit.

But in terms of underlying business performance, the UK market as a whole currently lacks obvious growth drivers. I think that may show through at some point in terms of weaker investor enthusiasm as UK share prices keep rising.

Market timing is a mug’s game

Still, there is no reliable indication of when that may happen.

On top of that, I could be wrong about where the economy is going.

So far, 2025 has been illustrative of this at the global level. There have been lots of concerns about the economy, but markets have largely taken them in their stride.

Here’s my approach

Either way, my approach is not to try and time the market, but rather always to see whether I can spot high-quality businesses selling for considerably less than I think they may ultimately be worth.

Obviously, if the stock market crashes, I will be happy to try and scoop up some bargains.

But even when the overall market has been doing well – like now – I think some UK shares may continue to offer me potential value.

I’ve been buying

For example, one share that has been doing well lately is transport specialist Journeo (LSE: JNEO).

News today (18 September) of a new purchase order pushed the Journeo share price up to its highest level in years. It is up 76% so far this year.

It now trades on a price-to-earnings ratio of 20. That does not seem obviously cheap.

However, while bus shelter timetable information might not be the sort of tech product that sets the NASDAQ alight, Journeo is among UK shares benefiting from fairly straightforward but practical real-world applications of proprietary technology.

With public sector spending at high levels, I think the company could hopefully continue to win lots of contracts. Each one it wins not only boosts revenues, but also helps boost its credibility with other potential clients.  

Too much dependence on local authority customers is a risk, if they need to start cutting their budgets. But Journeo has lots of potential for international growth, too, as its work with the New York City subway demonstrates.

That valuation is higher than I would normally like. But I am hoping next week’s interim results could bring yet more good news about the company’s outlook. I have been buying its shares.

The post UK shares: is there a reckoning coming? appeared first on The Motley Fool UK.

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C Ruane has positions in Journeo. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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