Investment trust managers have turned their attention to UK markets after Donald Trump’s tariffs sent global markets into turmoil.
The Association of Investment Companies has cautiously asked whether it could be the start of the rebound for a market that has been unloved in recent years.
Since the start of the year the average UK All Companies investment trust is up by around 10 per cent, as of May 8, compared to the average trust in the global sector which is up by under 1 per cent.
Alex Wright, manager of Fidelity Special Values, said the UK market is “well positioned” to withstand the current US-centric storm.
While David Smith, portfolio manager of Henderson High Income Trust, said with starting valuations low and trading at a discount compared with other global indices, now was a good time to invest in the UK.
He said: “Secondly, large cap companies in the UK are dominated by defensive businesses, such as consumer staples, where earnings are typically more resilient in an economic slowdown and where manufacturing is generally done locally.
“Finally, the UK economy is not a large exporter of products to the US so the direct impact on economic growth from tariffs is likely to be limited, which is important for more domestic businesses especially as the UK economy is showing signs of recovery.”
And the UK’s low political risk risks in comparison to much of the western world was a plus for Simon Gergel, manager of Merchants Trust.
He added: “The UK has a broadly balanced trading position with the USA, which means it is less of a focus for the US administration in their tariff policy.”
Fidelity’s Wright said while the UK market fell sharply in the wake of Brexit, it has been performing “roughly in line with international peers since 2020”.
He said: “This has made the UK an attractive hunting ground for contrarian value investors, and a fertile environment for the Fidelity Special Values trust.
“Over the last five years, the trust has done well versus the UK market, but also – perhaps more surprisingly – it has beaten the US technology heavy Nasdaq.
“This is not a result of any meaningful rerating in the UK stock market. Instead, it has been a product of strong earnings growth from UK companies in the portfolio.”
tara.o’connor@ft.com
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