Page 32 - DIY Investor Magazine | Issue 41

WHY WE’RE ADDING ANOTHER UK FUND TO OUR PORTFOLIOS
SALTYDOG INVESTOR IS MORE BULLISH ON THE PROSPECTS FOR THE UK MARKET, AND HAS ADDED A THIRD UK-FOCUSED FUND
UK stock markets have picked up over the past few months, but still have a lot of catching up to do.
· August 2024 32 After a disappointing 2022, when the FTSE 100 gained only 0.9% and the FTSE 250 lost -19.7%, the UK market started to recover in 2023. The FTSE 100 gained 3.8%, while the FTSE 250 rose by 4.4%. A distinct improvement, but not as good as most other world stock markets. The German DAX went up by 20%, the S&P 500 made 24%, the Japanese Nikkei 225 ended the year up 28%, and the Nasdaq beat DIY Investor Magazine them all, up 43%.
UK stock markets were fairly slow out of the blocks this year and at the end of February were showing year-to-date losses. However, things picked up in March when both the FTSE 100 and the FTSE 250 rose by more than 4%.
There were further gains in April when the FTSE 100 finally set a new all-time high, closing above 8,100 for the first time; in May, the FTSE 100 rose by 1.6% and the FTSE 250 added another 3.8%.
Both retreated ahead of the general election, but have started to rise again since. Markets do not like uncertainty, so were reassured the result was in line with expectations; the large Labour majority should bring some political stability.
Economic data has been encouraging - the UK economy grew quicker than expected in May, with the Office for National Statistics (ONS) reporting that GDP increased by 0.4%, exceeding predictions of 0.2% growth.
Another positive is that UK inflation remained unchanged in June at the 2% target for the second successive month.
We were concerned there might be some short-term volatility after the election, but markets seem to have taken it all in their stride. The FTSE 100 and FTSE 250 are currently showing month-to-date gains. The pound has also strengthened against the dollar and the euro.
So far this year, the FTSE 100 has risen by over 6% and the FTSE 250 by more than 7%.
In last week’s Saltydog analysis, the best-performing sector, based on the four-week performance of all the funds that we track, was UK Equity Income, up 3.7%. Next was UK Smaller Companies, up 3.5%, and UK All Companies was not that far behind, with a four-week return of 2.9%.
All three sectors have risen by more than 10% in the past 26 weeks.
We already hold a couple of UK Equity sector funds in our demonstration portfolios. Last December, we invested in
the Ninety One UK Special Situations fund, from UK All Companies, and then in May we added Schroder UK Smaller Companies fund. We have just added a fund from the UK Equity Income sector.
There were plenty to choose from, but in the end we went for the J O Hambro Capital Management, JOHCM UK Equity Income fund. It was at the top of our 26-week performance table and also featured in our four-week table.
For more information about Saltydog, or to take the two-month free trial, go to www.saltydoginvestor.com
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