Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

UK Multi-Cap strategy - Signs of economic recovery are being met with rising markets

  • 22 June 2020 (5 min read)

Key points:

  • The UK equity markets continue to rally in May
  • Stock selection and sector allocation drove outperformance
  • Demand for cars and housing markets remains healthy

What’s happening?

Global equity markets posted positive returns in May, as slowing coronavirus infections resulted in governments action to ease lockdown restrictions. With case load data improving in many countries, investors are increasingly prepared to look forward to economic recovery and an improvement in company earnings. Oil prices rebounded strongly over the month as evidence grew of high levels of compliance following the announced OPEC+ production cuts. Political and economic risks remain as US-China relations continue to deteriorate and Brexit negotiations grind on.

In the UK, Mid cap companies (represented by the FTSE 250 index) continue to outperform large cap companies (represented by the FTSE 100 index) over the month.

Results from companies so far have reflected the significant disruption being caused by the COVID 19 pandemic. While it is too early to draw broad conclusions, we remain optimistic about the maintenance of productive economic capacity as a direct result of the financial support being offered to companies from banks, shareholders and governments. We continue to monitor how management teams are reacting to the current situation and are optimistic of economic recovery over time.

Portfolio positioning and performance

Over the month, the UK Multi-Cap strategy continues to perform positively in May, outperforming the FTSE All-Share Index. Outperformance was driven by both stock picking and sector allocation. Our long term overweight position in consumer services and our strong stock selection within this sector were beneficial to relative performance – our UK Media company, Future Plc, has strongly rebounded back in May after a  difficult month of March. The company has seen a strong increase of its operating profits with an acceleration of audience growth at the end of the period. Future reported a 2 digit number growth within its Online users segment following an increase of searches for advice and recommendations related to the coronavirus pandemic. Besides, both Autotrader, the UK largest online car sales platform, and Rightmove, the leading UK online property portal, have also strongly rebounded back over the month following the UK government confirmation to further ease the lockdown in June. Despite the economic shock due to the covid-19 pandemic, online research trend data suggests a significative increased in demand for cars and housing markets. Elsewhere, our Healthcare name, Clinigen, continue to strongly perform in May after a healthy month of April.

Outlook

Movements in COVID-19 case load, the incidence of mortality, together with the pace and extent of economic recovery will dictate both economic sentiment and performance over the short term. Central bank support remains widespread and there no evidence of restricted liquidity for either capital markets or individual businesses. Signs of economic recovery are being met with rising markets as risk appetite improves. It is worth remembering, however, that although economies are showing signs of improvement, the absolute fall in economic output remains significant.

We will continue to focus on UK and internationally-exposed businesses, where the fundamental profit drivers remain entrenched and equity holders benefit from the capital allocated and risks taken by management. We continue to believe that a rewarding strategy is to actively invest in UK-listed companies that are compounding their earnings and dividends, where corporate governance is world leading, where contract law and title law are dependable, and where company management teams are permanently accessible.

No assurance can be given that the UK Multi-Cap Strategy will be successful. Investors can lose some or all of their capital invested. The UK Multi-Cap strategy is subject to risks including; Equity; Smaller companies risk; Liquidity risk; Investments in small and/or micro-capitalisation universe; Investments in specific countries or geographical zones.

Have our latest insights delivered straight to your inbox

SUBSCRIBE NOW
Subscribe to updates.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.