While the UK PMIs have continued to firm in recent months, the August manufacturing PMI reflected the strongest reading since early 2018 while the services PMI reading was the highest since 2015. However, in an economy responding to targeted stimuli by the Government, this can be misleading and masks underlying structural issues and competitive pressures on the profitability of some businesses.  In fact, the gains in the PMI surveys have not been matched by a similar strength in hard activity data, such as GDP, retail sales and industrial output, prompting the Bank of England (BoE) to hold its Bank Rate at 0.1% and its asset purchase target unchanged at £745B.

During the past month global stock markets were under pressure with the MSCI World Index and the S&P 500 down (in US$) by 3.6% and 3.9% respectively, largely driven by the decline in the large technology stocks from their highs in August.   The 3.5% decline in the pound resulted in the UK market under-performing the global indices in US$.  The FTSE 100 was down by 0.1% as was the AIM All Share Index, the FTSE 250 was down by 2%, the Small Cap Index declined by 1.4%, while the Fledgling Index was up by 1% for the month.

While our overall performance was once again dragged down by our 29% exposure to the property trusts, we are nevertheless pleased with the overall result with the portfolio declining by 1.1% during the month.  After providing for the interim dividend and company expenses the net performance as reflected in the NAV was a decline of 2.2%.

Until the direction of the Brexit negotiations and the potential success of a Covid-19 vaccine is a little clearer we have chosen to do very little, using some of our cash to acquire additional shares in Smart Metering and Churchill China and to pay the interim dividend.  Cash comprised 2.6% of the portfolio at month end.