Such a summer of celebration may seem at odds with the gloomy post-Brexit prognoses that, like the booze, flowed thick and fast this week. Perhaps the electorate are increasingly in need of a stiff drink, given warnings of food and medicine shortages to come. More likely is that most aren’t paying attention or simply don’t believe the hype – figures from research group IHS Market this week showed that households are optimistic about their finances for the first time in over two years, and in July splashed the cash at a faster rate than they had since early 2015.
Much of this extra spending has found its way into supermarkets, which according to data from industry tracker Kantar Worldpanel saw their sales climb 3.6 per cent in the 12 weeks to 15 July, including £287m spent on booze alone in the week of crunch World Cup games against Colombia and Sweden. That and the ongoing boost from the heatwave has provided further support for a broad sector recovery, which has seen the FTSE 350 Food and Drug index climb nearly 50 per cent since November. In the case of Tesco – whose fall from grace was greater than most of its rivals due to a major accounting scandal – analysts expect this to continue, with 13 out of 23 recommending the shares as a buy, versus just four saying sell.
That’s somewhat at odds with outlandish predictions this week that food rationing could soon be on the way back, but then again it is common for pessimism to overshoot reality. In investing this is known as the ‘negativity bias’ which causes most people to place significantly more emphasis on bad news or experiences than good – as much as three times more, according to some scientists. This spring’s tech sell-off provides a great example of that bias in action – the Cambridge Analytica scandal saw many predicting meltdown for the sector, but instead the FAANGS (Netflix excluded) have swung back to hit new record highs.
Also fizzing to record highs this week were shares in Fevertree Drinks, whose results this week revealed that its expensive tonics are more in demand than ever (see Fevertree's results). That said, like tech stocks it would take an incredibly optimistic investor to buy its shares now – its shares trade on a PE ratio of nearly 80, which surely only makes sense if it can crack the US market, a graveyard for many a British company, including Tesco. One slip-up, and the pessimists will be out in force.
