Trying to time markets is indeed a ‘fool’s errand’. Various industry studies have shown that over lengthy timeframes, market-timed portfolios routinely underperform. It’s a mug’s game. But let’s have a go, anyway – or, at the very least, muse on prospects for the FTSE 250.
The index has lost 8.4 per cent of its value over the past five years and is now 22.1 per cent adrift of its last high-water mark in August 2021. The capitalisation-weighted index is more domestically focused than the top-tier benchmark, so is generally more reactive to domestic economic trends over the medium to long-term. So, news that UK gross domestic product increased by 0.2 per cent in the second quarter and by 0.5 per cent in June should have dispelled some of the bearish sentiments that have suppressed valuations. Things are rarely that simple, however.
Even though the index is more indicative of domestic economic performance, its constituents are not immune to wider effects. And indicators of the global trade cycle are clearly recessionary. The S&P US Manufacturing PMI remained in negative territory in July, signalling a further, albeit slower, decline in operating conditions. European and UK manufacturing PMIs are also firmly negative. Meanwhile, June statistics from the International Air Transport Association show that global air cargo decreased by 3.4 per cent – that’s set against the continuing recovery in air passenger numbers. Industry is feeling the pinch.