Asset Allocation Research for UK Advisers

The purpose of including alternatives in a portfolio, is for one reason: diversification. But how can we be sure alternatives are doing their job?

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​UK Equity Income: monthly index commentary for March 2024
by Rob Davies, UK Equity Income Index Specialist at Elston Consulting

The UK equity market joined in the global rally during March with gains of low single digits across the board. Larger companies were the best performing cohort making significant progress over their mid and smaller capitalisation peers. In part this was due to confidence about the Chinese economy returning as well as continuing gains by the US stock market dragging others along in its wake. As in recent month currency movements did not provide any significant influence.

The best performing sector was Materials, reflecting the better sentiment towards China, only just failing to record a double-digit percentage increase. Energy was not far behind, but Real Estate separated the two as falling inflation increased hopes that interest rates will fall. Financials had a good month. Low interest rates may dent income but should also reduce bad debts.
 
No sector had a negative return in March. More importantly the good performance of the three largest sectors, that all have low valuations, was the principal reason the fund, which has a bias to value, did better than the overall market.
 
The main results season has now ended so many stocks will have gone ex-dividend, i.e., share prices now reflect the payment of a dividend that will be distributed over the next few months. Although individually modest these cumulative payments accrue over the years to constitute a substantial part of the total return from equities in the long term. Accumulation units of the fund track the progress of this income being reinvested back into the market, and then generating further income. The income units just show the capital value of the portfolio after dividends have been distributed.
 
As the results season is now essentially complete the weightings of stocks in the index that the fund tracks have rolled forward and are now largely based on the forecast of dividends to be declared for the next financial year. Encouragingly, the forecast for the total has increased slightly.