Inside the mind of investors

Inside the mind of investors

Will the dam hold?

The markets tell us what investors are doing. But what, exactly, are they thinking? Towards the end of every month, Edison takes you: Inside the Mind of Investors.

UK stocks have been out of favour for a long time, with investors reducing their exposure in favour of US equities in recent years. The FTSE rally this year has shown a return to the UK stock market from both domestic and, mostly, international investors, driven by corporate takeovers, share buybacks, dividends and a strengthening UK economy. The biggest gains have been in the natural resources sector, from rising commodity prices (notably copper and gold), and in Financials, benefiting from now long-term higher interest rates.

Despite these gains, the FTSE has pulled back over the last few weeks, in part due to more uncertainty. UK headline inflation announced on 22 May saw a steep drop year-on-year to 2.3%, however this was largely helped by a government cut in the energy price cap with food and rent costs increasing. This has raised doubts over whether a cut will be pushed back or made at all this year. Despite worries, UK GDP was higher than expected (+25bp) and the Bank of England (BoE) and the IMF remain optimistic that a cut this year is a possibility.

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The Illuminator – May 2024

The Illuminator has outperformed the UK All-Share index on a six-month and one-year basis. Although the Illuminator has lagged in recent months and over a three-year basis, the portfolio continues to demonstrate its ability to generate robust returns. We remain confident in the fundamental law that companies that generate returns in excess of their cost of capital will deliver positive returns for shareholders over time. Proving this, the Illuminator has significantly outperformed the UK All-Share since inception by 1,319%.

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