May was a positive month for UK fixed income returns. It was the more interest rate sensitive fixed income asset classes which were the stronger performers, including investment grade bonds. It was also these which showed more volatility, as markets continued to try and second guess when the first interest rate cut would come. Markets responded positively in the first half of the month to the latest Bank of England Monetary Policy Committee (MPC) meeting. Whilst they took the decision not to cut rates just yet, comfort was taken in that two members voted for a rate cut, compared to one in the previous meeting. Enthusiasm was tempered in the second half of the month, with inflation coming out slightly higher than expected. Whilst it continued to move in the right direction, at 2.3% year on year to April, it had been forecast to be closer to the 2% target. High yield, non-investment grade bonds were also in positive territory for the month.

The latest voting from the MPC, coupled with stronger than expected economic growth, meant that the more domestic orientated UK equity indices, encompassing small and mid-cap companies, were the strongest performers in May. GDP figures showed that the UK came out of recession, with the economy growing 0.6% in the first quarter, which was above the consensus forecast of 0.4%. US equities were also one of the more positive performers, driven higher by members of the Nasdaq. There was particularly strong price action by Nvidia, whose earnings continued to surprise to the upside. However, we are starting to see a divergence in performance within the ‘Magnificent 7’.

The Fund outperformed the sector average during the month, returning 1.39% and 0.78% respectively.

Further information about the fund can be found on the Fund’s website: MIDSF.com

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.

The Fund is suitable for investors who are seeking to achieve long term capital growth.

The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.

Past performance is not a guide to future performance.