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Since the Brexit referendum, small-cap stocks have outperformed in the UK. The FTSE AIM All Share Index is up nearly 60% since the vote, while the FTSE All Share Index has gained less than half that (28%). From May 2017-2018, Miton’s UK Small Companies Fund returned 14.9%, outperforming the FTSE AIM All Share Index (10.5%) and the FTSE All Share Index (6.5%). Gervais Williams, senior executive director at Miton Group, told IGTV that the outperformance of his fund has been driven by ‘individual stock selection. There are individual companies which are hopefully able to take advantage of the uncertainty out there’. Williams said that while the small-caps are not entirely insulated from international uncertainties, they are small and agile, which provides an opportunity to outperform the larger-cap stocks.
Consumer recession around the corner?
Last week's first quarter (Q1) UK gross domestic product (GDP) was revised to be slightly higher (to 0.2%), thanks to increased household and government spending according to the Office of National Statistics (ONS). However, the British Chambers of Commerce (BCC) this month reported that it expects the UK economy to post its worst calendar year of growth since 2009. The business group downgraded its outlook for consumer spending, business investment and trade. Williams told IGTV there is ‘a lot of uncertainty out there’, pointing to political instability, the countdown to Brexit and rising interest rates from the Bank of England (BoE). Williams said that ‘there may be a consumer recession around the corner’.