Recent weeks have seen turmoil in the UK’s financial markets. Rocketing gilt yields; volatile Sterling; panic amongst pension funds; an intervention by the Bank of England; and at least two government policy U turns.
Yet, the UK equity market is down only 11% this year, materially outperforming many of its international peers (the S&P 500 is off nearly 25% over the same period). The reason? The UK is being propped up by heavy weighting of large sectors such as Oil & Gas and Financial Services, which are benefitting from the current economic environment.
But this masks a much more challenging underlying picture. The FTSE 250 – a better proxy for the UK economy – is down nearly 30% in 2022, with consumer-related and technology sectors particularly weak. The mood of the UK fund managers we have spoken to is downbeat. Performance is understandably poor and portfolio positioning is a challenge. And even if they spot a buying opportunity, record outflows from UK equity funds make it harder for them to back their convictions.
As a result, many companies are left feeling that their shares are meaningfully undervalued, that their strategic progress isn’t being recognised, and that attracting new investors has become difficult. So, how can you cut through at a time like this and best position yourself for when the upturn comes? We have five recommendations:
While none of these recommendations will be a panacea, and the current environment certainly makes it challenging for companies to make themselves heard, doing them in combination should create the greatest possible chance of success.