Investors’ confidence towards the UK went into reverse in July. While confidence in UK economic growth increased in June, it decreased significantly this month – by 26%. Elsewhere, confidence in the UK sector remained flat.
This isn’t a huge surprise given economic and political stability has been called into question – UK GDP has slowed, business costs are mounting, and policy reversals from the Labour party have dented its fiscal credibility. Investors are also questioning the potential for further interest rate cuts in the UK, across the short-, medium- and long-term.
Even still, the UK’s blue-chip index, the FTSE 100, has been outpacing other markets this year and just reached a record high – proving once again that economic health doesn’t always translate into stock market returns.
All other sectors saw an increase in investor confidence, with the North American sector rising the most at 24%. The S&P 500 and Nasdaq recently reached record highs, partly as some investors are chasing AI-driven tech giants once again. There’s also been some renewed optimism following Trump’s pause on tariffs and a reliance on the so-called ‘TACO trade’ (Trump Always Chickens Out).
We also saw a reversal in sentiment towards Japan and Europe – investors’ confidence towards these markets fell last month but rose 16% and 7%, respectively, this month. The European Central Bank (ECB) has been cutting interest rates, which could stimulate economic growth, while corporate governance reforms could benefit businesses in Japan.
For a third consecutive month, the most popular fund in July so far was actively managed. Once again, Artemis Global Income topped the table – it’s had an impressive streak of performance, benefitting from a greater focus on Europe and less on the US compared with some other global funds. Passives remain the most popular choice with investors overall though, with eight of the top ten funds being index trackers.
The most popular investment trusts were a real mixed bag, with more conventional trusts focused on areas such as global and European equities, as well as UK equity income, featuring in the top ten. Trusts focused on infrastructure also remain popular, including Greencoat UK Wind and NextEnergy Solar Fund. Many of these trusts pay an attractive income and continue to trade on large discounts, which have made them popular with investors.
Comment provided by Kate Marshall, lead investment analyst at Hargreaves Lansdown
