UK equities, led by the FTSE 250, have gathered some momentum over the past week as investors have swung behind the new Labour government and the UK’s economic recovery.
The midcap FTSE 250 index, which is stacked with domestic earners, has gained just shy of two per cent this week.
In the past month, it has gained 3.4 per cent, which has left it at its highest level since April 2022.
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The FTSE 100, which set multiple record highs earlier this year, has also gained, albeit not as dramatically. It has increased 0.4 per cent over the past month.
The FTSE 100 currently sits at 8,240, just shy of its all-time intraday record of 8,400 printed earlier this year.
Investors have rushed back into UK stocks as the economy’s prospects have improved.
This rebound looks set to continue, with figures out yesterday showing that the economy grew 0.4 per cent in May, twice as fast as economists expected.
Looking forward, economists think that the recovery will be largely driven by stronger consumer spending, which should provide a boost to many domestic firms.
The new government’s landslide majority should help to bring in a period of political and economic stability, which will be a relief for investors.
Chancellor Rachel Reeves has said economic growth will be a “national mission”, suggesting that there are further growth friendly measures to come alongside already announced changes to the planning system.
“Investors are looking at the UK with the new pair of eyes and a bit more confidence,” Julien Lafargue, chief market strategist at Barclays Private Bank, said.
“In the UK or eurozone – the discussion over the next few months will be revolving around politics – this is not part of the conversation in UK anymore – is one of the reasons we see investor interest.”
An improving economic picture has also provided some support to sterling, which climbed to its highest level against the dollar in a year yesterday.