Markets riding high as UK economy beats expectations

Yesterday was a positive day for the stock market, with the FTSE 100 now trading close to a one year high, led by domestically-focussed stocks, and following on from second quarter UK GDP growth coming in ahead of expectations at 0.6%. Even the FTSE 250 is back in the game, and is now trading close to its pre-Brexit level.

Longer term total returns from the UK stock market are also looking pretty good right now, though clearly there has been some choppiness along the way, and no doubt there will be more to come.



Total return/ %
1 year 3 years 5 years
FTSE 100 6.3 14 36.5
FTSE 250 0.2 25.5 66.1
FTSE Small Cap 2.8 26.1 63.0
FTSE All-Share 5.2 16.4 41.0 

Source: Lipper to 26th July 2016

Laith Khalaf, Senior Analyst at Hargreaves Lansdown commented:

‘Today (27/07) there’s been positive news for stocks at both a micro and macro level. Domestically-focussed stocks started the day on the front foot, with Taylor Wimpey, Rightmove and ITV all posting robust results, and GlaxoSmithKline announcing £275 million of investment in the UK. The strong UK GDP figures added to the confident mood, as stock prices shrugged off the Brexit blues.

However, all today’s figures look back to a period predominantly before the referendum, and as such they give us little indication of what the vote actually means for the economy, or the companies exposed to it. They do at least tell us the economy has some momentum going into the implementation of Brexit, and may yet give the Bank of England pause for thought when they decide whether to cut interest rates next week.

Indeed much of today’s rise in GDP was down to the manufacturing sector, which recorded its strongest growth in six years. Ironically, the makers appear to be marching now George Osborne has left Number 11. Business and financial services grew, but at a slower rate than in the first quarter, whereas construction output went backwards. We can see uneasiness over these sectors reflected in the stock market, with UK banks and house builders still licking their wounds from the heavy share price falls sustained since the Brexit vote.

The UK’s mid cap index has staged an impressive recovery since the referendum, but there have still been casualties of the decision to leave the EU, with around a fifth of the names in the index showing double digit price declines since the result was announced.’

(Source: Hargreaves Lansdown)