Small and medium-sized UK companies generally outpaced their larger counterparts during May, boosted by the Conservative Party’s narrow victory in the General Election. Investors had expected another hung parliament, so an outright majority removed an element of uncertainty and helped to lift share prices among these businesses, which tend to be particularly exposed to domestic economic developments. The FTSE 250 index achieved new highs in the wake of the election result.
The Conservative majority also lifted share prices in the banking, energy and housebuilding sectors, which had all been expected to fare badly under Labour’s plans for tighter regulation. Later in the month, house builder Barratt Developments increased its forecast for the number of housing completions this year, citing an improved mortgage market and a benign environment for borrowers.
Over the whole month the FTSE 250 rose 3.9%, while the FTSE SmallCap index climbed 2.9%. By way of comparison, the FTSE 100 index edged 0.3% higher during the month. Among the blue-chip companies, ongoing uncertainty over the outlook for Greece helped to curb demand for banking shares during May. Also in the banking sector, the UK government cut its stake in Lloyds Banking Group to 19.93% following the sale of another tranche of shares. Elsewhere, a cut in China’s key interest rate proved positive for the UK’s mining sector.
All in all, the outlook remains favorable and our clients will hopefully benefit from the upbeat outlook.
If you would like to discuss the current outlook, or have any queries or concerns regarding your own situation, please do not hesitate to get in touch with Platinum as always.