After yet another miserable session in the US yesterday, Europe and pockets of Asia managed to avoid the rout and push ahead on Tuesday. This is unexpected given market sentiment is weak and the VIX ‘fear’ index yesterday jumped to its second highest closing price in the past 12 months.
Stocks in general have struggled this year, with investors worrying about inflation, rising interest rates, a slowdown in the world economy, war in Ukraine, new Covid flare-ups in China, weakness in consumer spending and concerns that business investment might take a back seat.
“The narrative has gone from ‘how can I make money?’ to ‘how can I protect my money?’,” says Russ Mould, investment director at AJ Bell.
“Growth stocks have gone from invincible to un-investable in the eyes of many investors, while commodity producers have also lost their shine of late, depressed by concerns that economic activity is grinding to a halt.
“Investors are increasingly favouring stocks with generous dividends as the trickle of cash payments is at least one form of positive return on an investment. It’s no coincidence that the entire top 10 risers on the FTSE 100 today, as measured by index points, are all mid-to-high yielding stocks including HSBC, Unilever, Glencore and British American Tobacco.
“The latest BRC-KPMG Retail Sales Monitor shows what everyone has been thinking – that the rising cost of living would force people to cut back on their spending. Big ticket items like furniture and electrical goods have been the first place to suffer as it’s pretty easy to decide not to spend £1,000 on a new sofa when money is tight.
“A decent bout of weather in April helped to keep some sales ticking over, such as garden goods and new clothes to wear out in the sun. But even these treats could fall foul of the cost-of-living squeeze in time.
“The outlook for retailers is bleak and they either have to cut prices to keep volumes ticking over, which will hurt profit margins; or they hunker down and accept that life will be hard near-term and so it’s all about keeping a lid on costs.”