Some large companies hit new lows this month and trade talks stole the conversation once again.
Volatility strikes whilst the pound slides: the Markets in May
Stock markets in May were volatile, trending lower over the first part of the month, followed by a mid-month recovery only to once again decline on the back of concerns over US / China trade talks, potential for slowing economic growth, Italy and the political situation in the UK. The latter caused the pound to slide to a 5-month low against the dollar.
Labour Party announced their plans
A further consequence of UK politics focussed increasing attention on the utilities sector, as the Labour Party set out initial plans to renationalise the UK’s electricity and gas networks. There was also criticism from consumer charity Citizen’s Advice about over charging. We have upped the risk on stocks in the sector and, while genning up on Labour’s intentions for utilities may not be high on everyone’s list of summer reads, it may reward. CEOs of potentially affected companies have already been rallying support and as we know politicians apparently don’t always deliver on past promises.
A number of well-known and commonly held companies, especially for income seekers hit new 5 or 10 year lows including, SSE, BT, Marks, Vodafone, Centrica, Sainsbury, ITV and Royal Mail. Dividend cuts did not come as a surprise from Vodafone, Marks and Royal Mail and expectations are growing that Centrica will be the next. With the FTSE up by 7% year to date this will be viewed as disappointing, but in order to try and balance the negatives the following large cap companies that have been on our buy list for some time have hit highs and include, Experian, Rio Tinto, Diageo, Compass Group, RELX, Tate & Lyle, Unilever and Smith & Nephew.
Companies where takeover rumours have circulated include: Astra, Centrica, Tate & Lyle, Just Eat and Purplebricks. Further consolidation amongst challenger banks could be a possibility with Paragon Banking Group mentioned as a potential target. Activist investors have been to the fore, putting pressure on companies such as, Whitbread, Allied Minds, FirstGroup and Merlin Entertainments, while Bovis cast an eye over Galliford Try and Interactive Investor had early-stage discussions with Share plc.
Looking ahead to June, luckily we are going to be spoilt for choice when it comes to sporting events, to take our minds off and hopefully trump events at Westminster.
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