Stock markets have continued to make good progress and encouragingly the FTSE250 Index, which is viewed as a good barometer for the health of the UK economy due to its greater weighting to more economically sensitive sectors such as Industrials and Consumer Discretionary, has been keeping pace with the FTSE100. It has now risen by over 20% from its October lows and this improving sentiment is seemingly backed up by a recent survey from Bank of America which found global investors to be at their most bullish since November 2021. The caveat to this though is that rising levels of confidence still appear to be driven more by optimism surrounding interest rates than improving company earnings.
Those investors who have retained a healthy allocation to our home market, as painful as it might have been in recent years with the US index powering ahead, will have hopefully started to reap their rewards and there may be more to follow over the coming months. The cost-of-living crisis seems to be subsiding a little, with data showing wage growth of 6% now. This rate is well above inflation, which itself seems to be trending back down towards the Bank of England’s 2% target. Data released this morning will hopefully have confirmed that the Monetary Policy Committee can continue guiding towards summer rate cuts. Some more good news is that the UK has emerged from recession, with GDP data for the first quarter of the year rising by 0.6% as the services sector, an area crucial to the UK economy, grew for the first time since early last year. All of this is likely to keep investors positive on the prospects for UK equities, and it could be that a prolonged period of underperformance is now starting to reverse.
