Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

A UK stock market bounce back has recently felt more like of a question of when, not if. Vaccine rollouts should help unlock our economy and tap into many households’ inadvertently accumulated savings.

The question of ‘when’ could be an important one for UK investors. They’ve had to undergo a long period of underperformance from our home market, while its most important sectors - services, industrials, financials, and so on - struggled more than others during the pandemic. Many will be champing at the bit for the tide to turn in their favour.

Unfortunately for them, three sets of data released over the past couple of days haven’t made the picture any clearer.

On the one hand, UK inflation fell unexpectedly from 0.7% in January to 0.4% in February. This is far below economists’ expectations for an increase to 0.8%. Sluggish clothing and footwear prices have done most to drag down the headline rate.

This goes against the grain of rising inflation expectations, evident recently in traditional measures like rising bond yields and a higher five-year break-even rate.

Driving those expectations is the idea that as we emerge from lockdown, a return to shops, holidays, leisure and restaurants should all drive prices up sharply.

Andy Haldane, chief economist at the Bank of England, has been adding fuel to the fire - yesterday he said the UK economy could see a “rip-roaring” recovery if “even a small amount” of household savings get spent.

Today’s data confuse that picture, but they don’t derail it. Experts still expect an inflation figure much closer to the government’s target of 2% to arrive by May. Last month’s fall may ease the concern of bond investors, for whom inflation threatens to reduce the value of their fixed income, but a rise still looks close to inevitable.

A more important, and positive, message emerged from yesterday’s IHS Markit/CIPS UK composite PMI figures, which told us that economic activity in March rose at its fastest rate in seven months. The index - which rose from 49.6 to 56.6, with anything above 50.0 signalling growth - is way above the 51.1 forecast.

Greater activity suggests companies are preparing for a surge in spending once restrictions are lifted. Service sector firms - which account for around 75% of the economy and have been among those hit hardest by the pandemic - drove the growth.

Service companies have also taken on more staff, contributing to some other good news - UK unemployment has fallen for the first time during the pandemic, according to data released on Tuesday. The unemployment rate fell slightly to 5%, down from 5.1%, over the three months to January.

Nevertheless, the employment picture remains far from rosy. Those figures represent what’s likely to be a temporary improvement. Unemployment is expected to peak at 6.5% by the end of this year, once the chancellor’s furlough scheme wraps up for good in September.

So, there we have it, three sets of data, and no clear conclusion. There’s encouragement here, but it’s not to be taken out of a context of inevitable bumps along the road.

All this serves as a reminder of the futility of trying to time the markets. Assuming the UK is due a bounce back, it won’t be clear when precisely it’s started. There’s an argument to be made that it began with the first positive vaccine news back in November.

Rather than waiting to nail the timing and subsequently leave your money out of the market, it may be best to start slowly with monthly contributions, and to build a position as you feel comfortable.

Or, if you remain unsure but would like to make use of your £20,000 ISA allowance before this year’s deadline on 5 April, remember you can secure it now and choose investments later by opening a Stocks and Shares ISA and choosing the option ‘add cash’.

Alternatively, if you want to invest but don’t know how best to play a UK recovery, don’t worry, you’re not alone. Fidelity investment director Tom Stevenson ran into the same trouble when selecting his ISA fund picks for 2021. That’s why he’s gone for two UK funds, one value-focused, the other growth - the Fidelity Special Situations and Fidelity UK Select funds, respectively.

You can find out more about the funds here.

Important information

Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Please note that Tom’s picks are not a personal recommendation for you. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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