Labour lows and space-y market highs

This week, stock markets have roared to new highs, led by yet more giddy tech euphoria and optimistic views around de-escalation in Iran, at the same time as investor confidence has hit new lows.

We track investor confidence on a monthly basis and, in April, net sentiment about the global economy was -48%. This is as low as it was in the darkest days of Covid. The specific question is whether people think that the global economy will be better or worse in 6 months’ time. Take the negatives away from the positives and that’s your score.

There are some gloomy signals for sure. This week, the US announced that its debt (a cool $31 trillion since you ask) was higher than its GDP. This has not happened since the Second World War. Put into plain English, this is like a household which borrows more than its annual income. You can get away with it for a bit, but if interest rates are high, you spend more of your income on servicing the debt every month and, at some point, it bites. The risk is a change to the US credit rating, which then makes borrowing more expensive for both households and businesses.

Back in Blighty, and markets are reacting nervously to early suggestions of Labour’s drubbing in council elections. They don’t like political instability and worry about some punk coming into power and spending money like it’s going out of fashion (remember Liz Truss’ mini-Budget, anyone? Maybe not a punk, but you get the point). We can see the nerves as the costs of lending money to the Government for a long time (30-year gilt yields) are as high as they’ve been for decades. 5.8% since you ask. Not good.

Away from the ailing High Street and back to the punch-drunk Wall Street

In April, people piled back into markets after weakness in March and gobbled up the S&P 500

, global shares, and tech stocks. Retail investors are excited about the markets at the same time that they think the global economy is set to slump. It’s a bit like shoving another Pinot Grigio down your neck at 11.45, knowing that the party ends at midnight. (I’m all class, me).

But the music is still going strong – the S&P 500 hit another new high yesterday.

What are investors buying?

Every month, we report the best-selling funds on major retail investment platforms. In April, Fidelity Index World

kept its popular spot and was re-joined in the Top 10 by Legal and General’s Global Technology Fund. Here’s a fun fact. Fidelity World Fund has over 1,300 of the largest global companies in it. But just 2 companies – Nvidia and Apple – make up about 10% of this fund. Astonishing.

As for Exchange Traded Funds (ETFs), and it was largely a story of the S&P 500. Not a bad choice as it turns out – the S&P 500 was up around 10% in April alone. We did see some signs of caution as a few cash-like Money Market ETFs made an appearance alongside their spicier share cousins.

And something more heavenly is happening with Investment Trusts. Seraphim Space Trust is up there in the bestsellers, as is Scottish Mortgage. This Trust has around 19% allocated to Musk’s privately owned SpaceX. If you think space tech is for space cadets, then Polar Capital Technology Trust is a more terrestrial option back in favour with tech-hungry investors.

A final whisper. Anyone who is considering opening a Stocks & Shares ISA might like to have a sneak preview of something we’re launching next week. It’s a big week ahead for me, but I will tell all in next week’s blog. For now, have a lovely weekend and please can the sun come back?

Holly