The steady march higher for equity markets continued in August despite government bond yields grinding higher. Policy support remains favourable for equity investors, though economic recovery momentum appears to have stalled and COVID-19 cases continue to intermittently spike and decline around the world. From a bottom-up perspective, encouragingly we’ve started to see a gradual stream of companies begin to recommence dividend payments, which suggests some improvement in underlying business confidence.
The FTSE All Share Index reported a gain of +2.4%, which reflected relative underperformance against global indices. UK equity valuations are undemanding, though Brexit worries persist and market bias towards value sectors has not been helpful year-to-date (YTD). For sector performance, consumer services, industrials and technology led returns. Utilities, healthcare and energy industries were all weak in the period.
The L&G Alpha Trust delivered a positive return of +5.1% in August. Stock selection and sector allocation both made positive contributions to performance. For allocation, the portfolio benefitted from its overweight positioning to consumer services and underweight in utilities and consumer goods. Stock selection within consumer services and financials made the most notable positive contribution. At the individual company level, ASOS, Aveva Group, Wizz Air, JD Sports and Ocado Group outperformed. Balfour Beatty and Network International were the noteworthy detractors. For trading activity, we introduced new positions in 3i Group and Coca Cola HBC. Holdings of Savannah Energy, Sigmaroc and Tatton Asset Management were all sold.