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.

THE final bank holiday of the year may mark the peak of the Great Staycation that saw millions of us taking a well earned break in the UK. If the last bank holiday at the end of May is anything to go by, UK retailers could be in for another bumper weekend.

Retail sales may have dipped a little in May, but that was only compared to a surge in April when retail restrictions were first lifted1. According to the buy now pay later lender Zilch, average spending rocketed 85% over the spring bank holiday compared to a normal weekend. Amazon, the supermarkets and the food delivery companies were all reported to have done well2.

The same will most likely not be true for airlines and tour operators, whose potential passengers remain mired in a confusing traffic light system and uncertainty over the testing and quarantine arrangements they may face before and after flights. IATA has reported only a slow recovery in air travel so far this summer, with passenger distances travelled in June still down 60% on pre-crisis levels3.

DIY, on the other hand, remains a popular pursuit which could do well again if the bank holiday weather remains changeable. Last month Kingfisher raised its sales guidance and reported further strong growth across all its banners. Online sales at the operator of B&Q and Screwfix were 188% higher in the three-and-a-bit months to 10 July compared with 2019 levels4.

Consumer firepower appears to remain strong even after several months of relative freedom. The UK savings ratio – a measure of how much households have saved as a proportion of their disposable incomes – remained at a near record level of 20% at the end of June5.  

That could have something to do with product shortages and tight new and used car markets after showroom and factory closures during the “pingdemic”. New car registrations were 22% lower than the 10-year average in July6. That leaves a lot more discretionary consumer spending still to be done.   

Investors can gain an exposure to the consumer recovery via the two UK funds that feature among Tom Stephenson’s five fund picks for 2021.

The Fidelity Special Situations Fund, is a long established value oriented fund on Fidelity’s Select 50 list of favourite funds. It seeks to invest in unfashionable areas of the stock market, with a focus on companies undergoing positive change. Current investments include the car dealer Inchcape – benefitting from a favourable pricing environment and its strong digital presence – and the low cost leader in European air travel – Ryanair – well equipped to capitalise on a loss of industry capacity.

The Fidelity UK Select Fund approaches the market differently, emphasising particularly businesses that have strong brands and robust balance sheets – “quality growth” companies, in other words. Unilever – attractively valued in relation to its US peers; Burberry, which has pricing power owing to its strong luxury brands; and Auto Trader feature here.

Source:

1 - ONS, 18.06.21
2 - London Loves Business, 03.06.21
3 - IATA, 28.07.21
4 - Kingfisher, 14.07.21
5 - ONS, 30.06.21
6 - SMMT, 05.08.21

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. The Fidelity UK Select Fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. The Fidelity Special Situations Fund and Fidelity UK Select Fund can invest in overseas markets, so the value of investments can be affected by changes in currency exchange rates. Both funds use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. 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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