Footsie reaches new highs

The FTSE 100 index hit a series of new highs in May, all comfortably above 8,000. Nevertheless, by most measures the UK stock market still looks relatively cheap. For example, in mid-May the FTSE 100 had a dividend yield of 3.56% and a price/earnings ratio of 14.36, while the US S&P 500’s corresponding numbers were 1.43% and 27.56.

Annuities regain popularity

Data from the Association of British Insurers shows that in 2023, pension annuity sales jumped by 46%, taking them back to the level of 2014, before pension flexibility began. Annuities’ new popularity reflects the more attractive rates on offer, thanks to the rise in long-term interest rates.

Interest rate cut hopes recede

At the start of 2024, the expectation was that the Bank of England would cut rates six times (to 3.75%) by the end of the year. By May, the experts were pencilling in two cuts by December, although the IMF thinks there could be three. The changed outlook reflects continued inflation risks, even with the CPI inflation yardstick hitting 2% in May. One worrying factor for the Bank of England is earnings growth, still at around 6%.

The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Investments do not offer the same level of capital security as deposit accounts.

The value of your investment, and the income from it, can go down as well as up and you may not get back the full amount you invested.

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