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Investment view

I had not realised how comprehensively mid-cap companies had trounced the FTSE 100 index. The FTSE 250 has outperformed the FTSE 100 by 35 per cent since 1999. This trend is even more marked in the US, where the outperformance has been even greater. The gridlock in our main market, on which I have commented before, has certainly taken its toll.

The disappointing performance of Vodafone has not helped. Once the biggest company by miles in terms of market capitalisation in the UK, it has lost its crown and has helped drag back the performance of this headline index over what is amounting to a particularly lengthy bear market. This is not an easy period for fund managers. You only have to look at Isa sales to realise there is considerable investor apathy.

Certainly, I was disappointed that more people did not turn up to the AITC forum held in York last week. Sitting on a stage on which Hank Marvin would shortly be strutting his stuff in his farewell tour as the Guitar Man, an audience of 60 IFAs was scattered among several hundred seats. It reminded me of a conference in Abu Dhabi several years ago. There, a plush conference hall with a seating capacity of more than 500 played host to an audience that started at 70 and dwindled to single figures. And this despite having such august figures on the platform as Howard Davies, then deputy governor of the Bank of England, and Sir William Purves, who was still heading HSBC. We even had a bull market running at the time. Apathy is not confined to bear markets.

I felt the apparent lack of interest in York owed more to a general disenchantment with investment matters than to a belief that investment trusts may not be appropriate to an IFA&#39s clients. There were some concerns expressed over the reputational risk that recent publicity concerning split-level trusts may have had, but overall the mood seemed to be one of quiet acceptance that the heady days of the 1980s and 1990s were behind us and that trying to be too clever going forward was not the right approach.

Even CP121 did not appear too threatening to this audience. True, those IFAs who expressed an opinion clearly took the view that they would rather not have any change but no one felt that the ending of polarisation would bring an end to their business.

Meantime, we learn that house prices continue to power forward, with yet another massive jump recorded for April. Simon Rubinsohn, Gerrard&#39s chief economist, has gone on record to say that he does not believe this to be a bubble about to burst. Lower interest rates and competitive mortgage conditions are creating a situation where houses are much more affordable than they were at the end of 1980s, when we last had such a surge in residential property value. The situation then was also buoyed by artificial conditions, thanks to the injudicious warning of an ending of tax relief. If the information I receive in my role as a parish councillor is anything to go by, there is still a shortage of certain types of housing, most particularly in the South-east.

Despite the relentless sideways move of the stockmarket, much of the big-picture news recently has been positive. Even manufacturing seems to be taking a turn for the better. The slowdown in the UK economy was undoubtedly greater than many expected, given the preliminary figures published for the first quarter of this year, there are now clear signs of a pick-up, and perhaps the Treasury&#39s optimistic forecasts for growth will not be quite so difficult to achieve. Still, there are not many manufacturers in the FTSE 100, so news that output is on the up can only serve to enhance the attractions of mid-cap shares. Perhaps the old economy will start to exert more influence.


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