Equities Return to Positive Inflows in June as Investors Express Cautious Optimism
June has marked a turning point for fund flows in the UK, with savers injecting £1.2 billion into funds, reversing the trend from previous months. This resurgence brought the total inflows for the first half of 2024 to £1.7 billion, a stark contrast to the £5.6 billion outflow witnessed in the first half of 2023 and the £18.6 billion outflow in the latter half of 2023. This change signals a growing confidence among investors, buoyed by a stabilizing economic landscape.
Equities, in particular, have been the focal point of this newfound optimism, with June seeing an influx of £1.2 billion. The decline in inflation rates and consequent adjustment of interest rates by the European Central Bank have played a significant role in this shift. Notably, Europe ex. UK equity funds recorded a record monthly inflow of £868 million, indicating a brighter outlook on the region’s economic conditions.
Global Investment Trends
The positive sentiment is not confined to one region, as the data further outlines a broad-based capital allocation to equities across different geographies in the second quarter. Global equities witnessed the highest inflow, amounting to £2.7 billion, highlighting a preference for diversification among investors. This is a noteworthy shift from the first quarter, where the spotlight was on North American funds, driven by the performance of the US and its leading stocks, attracting £1.5 billion in inflows.
Year to date, equities have seen a total inflow of £424 million, reversing the £10 billion outflow seen in the same period last year. Although the first quarter of 2024 started with mild outflows (£1.6 billion), a robust rebound during the second quarter, especially during the ISA season, contributed to a net retail sales increase of £2.0 billion.
Despite this positive momentum, UK equities have seen continued outflows after a record movement in May. Nonetheless, the changing political landscape and the new government’s commitment to economic growth are expected to boost investor sentiment towards UK companies.
Expert Insights
Miranda Seath, Director of Market Insight & Fund Sectors at the Investment Association, commented on the trend, highlighting the resurgence of investor confidence in equities. “Investor sentiment has been on the rise throughout the second quarter of 2024, helped by easing inflation and a thoughtful base rate cut from the Bank of England, the first since March 2020. This could signify a turning point for confidence and fund flows as we venture into the latter half of 2024,” Seath explained.
She also pointed out the challenges in the macroeconomic environment, particularly with the recent US employment data causing ripples across global markets. “The health of the US economy has broad implications, yet it’s essential for investors to stay committed to their long-term objectives, despite short-term market volatilities,” Seath advised.
The UK’s political shifts and the government’s dedication to fostering growth and ensuring fiscal responsibility are likely to instill further confidence in investors. “After a prolonged phase of outflows, there’s a palpable sense of optimism that UK equities might rebound in the upcoming months,” Seath concluded.
The shift in fund flows and the burgeoning investor optimism as of June 2024 serves as a reminder of the dynamic nature of financial markets. While short-term fluctuations can influence investor behavior, the underlying trends provide a clearer picture of long-term prospects. As economic conditions improve and with a supportive regulatory environment, equities might continue to attract positive inflows, potentially marking the beginning of a sustained phase of investment growth.
