The tightening of monetary policy in recent months by the US central bank and rising trade tariffs weighed on investor sentiment. Against a background of turbulent world markets, the UK equity market produced a negative total return of 5.2% in October, as measured by the FTSE All Share Index. Medium-sized companies underperformed with the FTSE 250 Index making a 6.7% negative return compared with the FTSE 100 Index of the largest companies’ negative return of 4.8%.
The best performing sectors were defensive with fixed line telecoms, utilities, pharmaceuticals and food producers all outperforming. These defensive sectors are less likely to be adversely affected by a possible cyclical downturn in the world economy. City of London’s portfolio is over represented in this area of the market and notable outperformers held in the portfolio included BT and National Grid. On the other hand, the stake in Royal Mail was a particularly poor performer after it warned on profits. The holding has been retained given the potential of its parcels business.
With the setback in share prices, the valuation of UK equities appears to have become cheaper and therefore additions have been made to existing holdings across the portfolio. The dividend yield from UK equities remains attractive relative to the main alternatives.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.
Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
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