As Brits head to polls, investors remain broadly constructive on the global outlook, but increasingly concerned on UK. Neil Wilson, Investor Content Strategist at Saxo UK, shares his insights.
Despite the challenging backdrop, investors have largely looked through near-term concerns and continued adding to positions, maintaining a positive view on markets overall. More active investors, however, have shown a willingness to rotate quickly between sectors and themes in response to geopolitical developments. We saw strong buying interest in Chevron and Exxon Mobil following Venezuela’s aggressive asset moves, renewed demand for defence stocks amid tensions over Greenland, and increased flows into Shell and BP after the outbreak of the Iran conflict.
US technology remains a clear area of conviction. Recent earnings and market moves have largely reinforced investor confidence in the sector, with Intel seeing a notable surge in buying activity after its results, part of a broader trend across chips, semiconductors and memory stocks. Earlier this year, participation in the S&P 500 rally broadened out, but that has since narrowed again as investors crowd back into AI and tech-related names.
That naturally raises questions around concentration risk, but fundamentals continue to provide support. Analysts are still upgrading earnings expectations, helped by strong guidance from the majority of companies reporting so far. As a result, valuation multiples are compressing rather than expanding, the S&P 500 PEG ratio, which measures forward P/E against expected long-term earnings growth, has continued to improve, suggesting there is still room for further upside.
So, while investors remain generally optimistic globally, driven largely by the earnings strength of US tech, there is a more localised sense of caution around the UK. The shift in UK interest-rate expectations has weighed on sentiment towards domestic assets, with geopolitical tensions and political uncertainty adding to concerns over the economic outlook.
The events of this year have underlined how exposed UK markets are to wider global fragmentation and geopolitical shocks. In response, investors have continued to favour active and diversified positioning. We have seen strong inflows into ETFs focused on themes such as semiconductors, mining, gold, silver, Korea and emerging markets, as clients look for both resilience and opportunity in an increasingly complex environment.
