After the sell-off at the end of January, this is a useful opportunity to assess whether share prices can in any way live up to the expectations being placed upon them. And the general indication is that in trading terms there isn’t, generally, too much to worry about right now, an observation that is also largely true of results coming out in key European and US markets – even if worries about the pace of future interest rate rises are holding back indices.
Published results of course only tell us about the past, when as investors we are more interested in the future. But, well-understood sector-specific issues aside, earnings forecasts are on the up, as companies editor Mark Robinson explains in this week’s Taking Stock column. That’s partly driven by the continued recovery of certain sectors such as mining, following a globally-coordinated economic recovery and the commodity price boost that has followed. It is also a reflection that the doom and gloom surrounding UK shares has been overblown – because FTSE 250 revenues are much more internationally diversified than is often understood, but also because fears that Brexit uncertainty would decimate the UK economy have so far proved misplaced.
Nowhere is this more apparent than in the case of housebuilder Persimmon, which pleasantly surprised its shareholders this week with news that it intends to up the level of capital returns. These special dividends have been a key attraction of the housebuilding subsector over the past few years, and along with a structural shortage of residential property in the UK, have kept us interested even as negative sentiment has mounted. Another sector that asked investors to see through the gloom has been financial services, which has faced, we are often told, an even more existential threat from Brexit. But big banks are bouncing back and resuming normal dividend service, while fund management groups have enjoyed strong inflows and are also upping returns to shareholders. This particular trend is particularly interesting, suggesting as it does that investors are also broadly unperturbed by the noisy threats coming from the world of politics. The wisdom of crowds, it seems, is prevailing.
That’s not to say that markets are a one-way bet, and investors will still – as always – need to choose their exposures carefully. As we enter another important investing season – the Isa season – it will be decision time for any canny investor looking to put their annual allowance to good use. But as our Isa special reveals, the options on offer give us many reasons to be cheerful.
