St. James’s Place Plc is another great example of bad news arriving when the price of a stock is due for a correction anyway. Headquartered in Cirencester, UK, STJ is the leading wealth management company in the United Kingdom. Between January 2022 and April 2024, the stock plunged 77% from 1742 to less than 400 pence a share.
The alleged reason for this sharp selloff was the UK’s introduction of the so-called “Consumer Duty” regulation, promoting greater pricing transparency among financial institutions. This forced the company to set aside a £426 million pre-tax provision, which ate its entire 2023 profit and then some. This, in turn, led to a 70% cut in STJ ‘s dividend, exacerbating the crash.
But the “Consumer Duty” Act went into effect on July 31, 2023, when STJ stock was already down 46% to 946 pence a share. Markets are forward-looking and apparently sensed what was coming a year and a half in advance. The amazing thing is that it all happened just when a natural Elliott Wave correction was supposed to occur anyway. Take a look.
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According to the theory, a three-wave correction follows every impulse. As its weekly chart shows, STJ ‘s 77% crash is a three-wave structure, marked (a)-(b)-(c). It followed a textbook five-wave impulse pattern, labeled (1)-(2)-(3)-(4)-(5), where the five sub-waves of waves (3) and (5) are also visible. The corrective phase of the cycle, as it usually does, erased all of the fifth wave’s gains and then some.
If this count is correct, St. James’s Elliott Wave cycle is complete and the recovery from under 400 to over 850 pence a share must be the beginning of a new major uptrend. A new all-time high makes sense in the long term. Besides, the new regulation is far from a company killer. In fact, STJ ‘s profitability remains unimpaired and funds under management continue to grow. Management expects to double the company’s cash earnings by 2030.
One area of mid-term concern could be STJ ‘s 37% exposure to the US stock market, which seems quite overvalued right now. That being said, the company has successfully navigated crises and stock market declines before and should be just fine if another one takes place.
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