6. Weekly Newsletter

FTSE100 Hits All-Time High

The UK’s FTSE100 share index has beaten its 2018 peak with a 6.1% rise so far in 2023. Last year the blue-chip index was also the best-performing developed market index (in local currency terms) with an almost 1% rise- in a year in which the US’s S&P 500 declined around 20%. However, it is worth noting that the mid-cap FTSE250, which is more closely linked to the UK economy, has declined 6% over the last 12 months. Additionally, a portion of the gains seen on the leading FTSE100 are due to the reduced value of the pound sterling which has benefited multinational operations where revenues are generated overseas.

Historically, the UK has been criticised for being heavily exposed to oil, mining, banks, insurer, utilities and consumer staples businesses. Especially, since the FTSE lacks high-growth tech stocks like FAANG. Although, in an inflationary environment with rising rates there has been an ongoing push towards what AJ Bell describe as “potential stores of value”. For instance, Shell Plc has saw their share price rise 43% last year and HSBC has experienced a 15% rise significantly attributed to higher interest rates.

Newspapers & Politics

The UK’s front page news cycle over the last seven days has covered a wide range of topics with both former PM Johnson and former PM Truss outlining policies publicly in leading newspapers. Additionally, the coverage of widespread strikes by 200,000 teachers has disrupted education across the nation whilst interest rates are hiked to 4%.  Some of the newspaper front pages over the last week were:

• The Guardian: ‘Catastrophic’- thousands dead as earthquake hits Turkey and Syria
• The Daily Telegraph: Truss to challenge PM over China
• The Sunday Times: Sunak’s threat to pull UK out of the ECHR
• Daily Express: Boris- Tax Cuts Will Win Tories Next Election
• The Daily Telegraph: Online misogyny set to be outlawed
• Financial Times Weekend: FTSE100 reaches all-time high
• Daily Mail: New Law To Stop School Strike Mayhem
• The Times: Britain and EU set for Northern Ireland deal
• Daily Express: ‘Staggering’ 16.7% Rise In Food Prices
• The Independent: School’s out- 200,000 teachers strike in biggest shutdown for three decades
• Financial Times: UK alone in heading for recession as other big economies grow, IMF says
• The Daily Telegraph: Economy to shrink after tax raid says IMF

Political parties across the UK are gearing up for the May council elections whereby most English District Councils face their voters. Major cities such as Wolverhampton, Liverpool and Wigan alongside six other Midland and Northern will experience their entire councils up for election which will be seen as a test to the ruling Conservative Party’s popularity. The BBC has also reported that the Green Party may become a more influential party- although, the Greens only managed 2.8% of the vote in 2019. However, on Friday (3rd February) they did become the largest party in the Bristol Council following a by-election victory.

Bank of England Interest Rates at 4%

The Bank of England (BoE) has raised interest rates for a tenth consecutive time by 50bps to 4.0% following an announcement on Thursday (2nd February). However, the BoE now believes that inflation has likely peaked and that the UK recession would be shallower and shorter than previously forecast. The increase in interest rates was partly in response to private sector wages rising higher than expected and led to the BoE’s Monetary Policy Committee voting 7-2 in favour of the hike.

BoE policymaker Catherine Mann has additionally warned that further interest rate increases are to be expected in a bid to return inflation to the official target of 2%. Mann warned that she was “looking for a significant and sustained deceleration in higher frequency price increases and in the underlying inflation measures and expectations towards inflation rates that are consistent with achieving the 2% target”. However, with inflation falling there are signs of improvements within the market with products such as fixed-rate mortgages now expected to reduce below 4% (over five years).