In September, the UK equity market produced a total return of 3.0% as measured by the FTSE All Share Index. Both the FTSE 100 Index of the largest companies, which has an international bias, and the FTSE 250 Index of medium-sized companies, which is more focussed on the domestic UK economy, also returned 3.0%. The yield on the 10 year gilt ended the month at 0.5%, near historic lows, as evidence mounted of a slowdown in growth for the UK and overseas economies.

After a long period of underperformance, the Real Estate Investment Trust sector had a good month with British Land and Hammerson, which are both held by City of London, notable outperformers. The low level of gilt yields should provide some support for property capital values. Consumer staples stocks gave back some ground with Diageo and Unilever notable underperformers in City of London’s portfolio in September. In our view, these companies should benefit from steadily rising demand for their products globally, including emerging markets, over the medium term.

During the month, additions were made to quality cyclicals, such as housebuilder Taylor Wimpey and miner Anglo American. Utility SSE was also added to after it sold its retail business. No significant disposals were made from the portfolio.

There is considerable uncertainty in UK politics with a general election likely. The UK stock market has exposure through the companies which are listed on it to a mixture of the domestic as well as the global economy. UK equities continue to offer an attractive yield compared with the main alternatives.