TAM Bites: UK Equities, the Federal Reserve, and meeting Cathie Wood

Are UK Equities back in vogue?
Over the last three months, both the FTSE 100 and FTSE 250 UK indices have returned over three times that of the S&P 500 (9.94 and 9.93% vs 2.89%, via FE Analytics). This comes at a time where the UK is bracing for a general election, now just one month away. The polls suggest that Labour have a healthy lead over the incumbent Conservative party. And we await to see whether ex-UKIP leader Nigel Farage announcing he is running as Leader of Reform UK, will dampen the Tories chances further. We hasten to add that there are other factors at play too, with prospective interest rate cuts bringing attention back to the market, and this optimism perhaps amplified by the fact that in March, UK stocks were trading at record discount to their US counterparts.

The Federal Reserve… back on its tightrope
Is the US economy losing momentum? April’s PCE figures for the US, which measures the prices paid for goods and services, and is the Federal Reserve’s preferred gauge of inflation, cooled to 2.7%. This marked the smallest advance year-to-date, offering some solace about the pathway for inflation. Personal incomes rose 0.3% from the preceding month, whilst personal spending only rose 0.2%, which in real terms highlights a 0.1% decline in disposable incomes. These economic readings are beginning to manifest a bleaker view for the US, as pent-up inflation is starting to pierce the seal of US consumer resiliency, now eroding their savings cushion. PMI (purchasing managers index) data, a barometer for manufacturing activity, is also the lowest it’s been since May 2020. And comes at the heels of a downward revision to annualised GDP to 1.3% from 1.6%. In short, cracks are beginning to emerge, and a possible economic slowdown is becoming hard to ignore. This puts the Fed back on its tightrope, as they keep policy rates tight to constrain inflation but must also avoid a financial mistake. A mistake that could see rates kept higher for too long, tipping the economy into a recession right around the corner from US elections.    

TAM meets Cathie Wood
Cathie Wood, CEO and CIO of Ark Invest, became a household name in 2020 after her flagship innovation fund became the top-performing global equity fund (with at least $1bn assets). She made multiple appearances on Bloomberg, CNBC and other major news outlets and became the face of that market rally. Ark Invest has built out their European product range of disruptive innovation products and TAM are pleased to be one of the first houses involved in the conversation. One of our portfolio managers met with Cathie recently, where she discussed the power of disruptive innovation from their genomic focused product to artificial intelligence & robotics. These are areas in which TAM are seeking a diverse range of expert insight as we navigate these society altering opportunities.