It seems likely that we will wake up to a new UK government tomorrow, and investors in stock and bond markets will then assess what this means for future portfolio returns. Whilst we wait though, there has been some increasingly positive news from the retail sector with the GfK Consumer Confidence Index, which has been running since the 1970s, rising again in June and providing its strongest reading since November 2021.

When sentiment rises, it can often be followed by higher levels of consumer consumption and indeed retail sales rebounded sharply during May after wet weather earlier in the year deterred people from visiting the high street. Within the data, clothing sales looked particularly strong as wardrobes were refreshed ahead of the summer season and should England continue to progress at Euro 2024, spending may well receive a further boost.

It is still important to remember that for a large part of the population, nearly three years of higher inflation will have left a lingering effect on living standards, but with inflation now at least temporarily back down to the Bank of England’s target, rising wages and higher levels of disposable income do appear to suggest that a consumer recovery is underway.

Despite all of this, the retail outlook still remains demanding for many businesses – and investors will need to be selective in their approach. Weaker consumer tyre and cycling markets recently weighed on the UK retailer Halfords, who also warned that rising sea freight rates are once again adding to cost pressures, whilst shares in US sportswear maker Nike were down 20% last week after a warning that sales would fall this year amid slowing demand within what looks to be an increasingly competitive market.

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