For the first time in over three years, investors who are optimistic about UK equities now outnumber those who are more pessimistic. This shift is a significant development, reflecting a more favourable outlook for British stocks. According to a survey conducted by Bank of America Corp., a net 2% of investors now consider themselves overweight on UK equities in a global investment context. This is the first positive sentiment recorded since June 2021, as noted by strategists, including Andreas Bruckner, in a communication to their clients.
The recent concerns surrounding the technology sector and the broader global equity market have contributed to making the UK’s non-cyclical sectors more appealing. Fears of a potential US recession have added to these concerns. As a result, investors are increasingly turning to sectors like utilities, which have seen their highest levels of exposure since 2008. At the same time, consumer staples have become more favoured, marking the highest overweight position on these stocks in a year, according to Bank of America’s analysis.
In addition to this changing sentiment, fund flow data indicates that the tide may be turning for British shares. The upcoming change of government in Britain, anticipated in July, is seen as a positive development for domestic firms, which have struggled with instability in the aftermath of Brexit. Although UK equity funds saw an outflow of £919 million ($1.2 billion) in July, this was the smallest monthly outflow seen so far this year, as reported by the Investment Association.
The UK’s benchmark FTSE 100 index has also shown strong performance this year, rising approximately 11% in dollar terms. This gain has outpaced the Euro Stoxx 50, underscoring the recent momentum behind UK equities in the global market.
The combination of global market uncertainties, sectoral shifts, and a more stable political environment has contributed to renewed optimism among investors regarding the prospects of UK equities.
Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.
