- There remain pockets of value in UK equities.
- Trust discounts have yet to catch-up with portfolio gains.
In the first four months of 2024 the investment companies sector (total returns 3.1 per cent) lagged the FTSE All Share (6.1 per cent), but this creates a very different dynamic for trust discounts compared to two years ago. Back then the gap between trust shares and the net asset value (NAV) of their investments was due to a powerful negative trend in the markets hitting liquidity in the sector. Now, trust shares are slightly behind the curve of what was a strong recovery for the UK stock market.
Inflation data was disappointing, as although moderating overall, sticky services data means the Bank of England must be more cautious on when to start cutting rates. That’s a move that will be positive for the stock market and in the case of investment trusts, could spark a renaissance and prompt discounts to narrow.
