One week of markets in one minute: Beware the whipsaw as FTSE 250 rallies

UK mid-cap stocks jettisoned ruthlessly in the wake of the Brexit vote were the stars of the show this week, with a sharp jump on Monday sustained throughout the week to leave the index back near levels seen before the referendum.
While we may be a long way from business as usual, there is no doubting that, for now at least, Brexit fears have dissipated somewhat, with some order returning to the markets following the appointment of a new prime minister and cabinet.
Investors looking for bargains took full advantage of this, with the FTSE 250 index climbing from last Friday’s close of 16,197 to finish at 16,727 , some 3% higher. Domestic names including the challenger banks, housebuilders and consumer stocks such as Restaurant Group all enjoyed solid gains.
Meanwhile the constituents of the blue chip index, which have shrugged off the referendum vote much faster than their smaller cousins, continued to drive higher. The FTSE 100 added another 1.1% this week, to close at 6,669.2 points.
Peter Lowman, CIO at Investment Quorum, said investors who had moved assets out of UK equities in the immediate aftermath of the vote had been caught out by the snap back for markets.
“Doing less is often more during such periods, and indeed a number of investors who sold out after the vote have been whipsawed by the subsequent rally,” he said.
Looking forward, Lowman said nothing had really changed to fundamentals for most stocks, with the market very much in the throes of macro-driven moves.
Kames Capital’s chief investment officer, Stephen Jones, said there was a large amount of capital now waiting on the sidelines, and with the environment switching to one of “lower rates forever” certain areas looked attractive. “Within UK equities, we’re moving to larger caps and income-related companies,” he said. “But US equities probably offer the best opportunities over the next six to nine months.”
Indeed looking overseas, Jones’ words rang true, with the S&P 500 hitting a new record peak during the week, above 2,150. By the end of Friday, after London closed, it had moved more than 1% week on week, trading at 2,159 points.
Further afield Japanese equities also shot higher, with the Nikkei 225 climbing some 9% in a week to close at 16,497 points following Prime Minister Shinzo Abe’s resounding election victory. Investors are betting his famous stimulus programme will be given fresh impetus now his party controls both houses.
Against such a resurgence in optimism for equities, it was perhaps inevitable gold would give back some gains this week, and indeed the precious metal was down some 3% at $1,326 by the end of the week.
In currency markets, the pound continued to bounce back, although it remains substantially weaker against all major foreign currencies. Even gilt yields managed to come off lows, the 10-year note back above 0.8% by Friday, having sunk as low as 0.70% in the last week.
The Brexitometer
In the wake of the crisis, and in order to provide a quick and easy snapshot of the real impact of Brexit on markets, we will be updating the Brexitometer weekly, detailing the impact of the EU referendum result on UK markets.
FTSE 100: UP 5.3%
6,338 points at close on 23 June.
6,669 points at close on 15 July.
FTSE 250: DOWN 3.5%
17,334 points at close on 23 June.
16,727 points at close on 15 July.
FTSE All Share: UP 3.5%
3,481 points at close on 23 June.
3,604 points at close on 15 July.