How Budget rumour mill is affecting the UK stock market
UK stocks have lagged overseas rivals for months now, but why? We asked if you had stopped buying UK shares and, if so, why. Here’s what you said.
17th October 2024 12:51
by Lee Wild from interactive investor
It’s five months since the FTSE 100 hit a record high. It feels longer. The blue-chip index quickly settled into a tight trading range where, apart from some brief excitement in August, it has remained. But why?
Wall Street has been the place to park your money, at least for the past 12 months. The Nasdaq Composite tech index is up 35.7% and the S&P 500 only slightly less at 33.6%.
The FTSE 250 is the best of the UK indices, a creditable 19.2% better. But the FTSE 100, which is exposed to overseas earnings, is up just 8.9% and the FTSE All-Share index is 10.4% higher.
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Since hitting 8,474 in May, the FTSE 100 has spent most of its time between 8,100 and 8,300. It’s journeyed modestly above that upper level in recent weeks, but appears magnetically drawn back into that tight range.
Source: TradingView. Past performance is not a guide to future performance.
However, there has been another breakout attempt today; the FTSE 100 rallying to a one-month high less than 100 points from record territory.
We wanted to find out what was holding UK stocks back, so we asked visitors to the interactive investor website if they’ve been put off buying UK shares and, if so, why?
Two-thirds of the 1,202 respondents to our poll run on 26-27 September 2024 said they were still buying UK stocks, with 27% answering no.
With so much uncertainty and speculation around the Budget on 30 October, we wanted to know if the upcoming fiscal event had stopped investors buying UK shares. Apparently not. Three-quarters of respondents said no. However, 20% did say that they weren’t investing in the UK because of rumours about what might happen at the end of this month. With income tax, national insurance and VAT protected by Labour, the hot money’s on an increase in CGT and changes to pensions.
We also asked investors who weren’t buying UK shares currently, what the main reason was. Of the 856 who responded, the UK Budget and preference for US growth stocks were tied at the top with 16% each. Thirteen percent said they were investing in other assets and 11% are parking their money in a high interest cash account. Forty percent cited ‘other’ reasons for going elsewhere.
Finally, we wanted to know what would make people invest more in UK stocks. We got 1,273 answers from 807 respondents, most popular of which was an investor-friendly Budget on 30 October at 36% of respondents and 22.9% of answers.
Improving economic growth was important to 35% of respondents and made up 21.9% of all answers. Removing stamp duty on UK shares and investment trusts was also a popular choice (28% of respondents), as was evidence of better UK company profit growth (27%). Lower interest rates would influence 13% of you to invest more over here.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.