Regency View:

UK Sector Snapshot

As we head into Q4 we’re going to take a look at which sectors look set to outperform and which sectors are showing clear signs of weakness…

SECTOR STRENGTH

We’ve seen significant strength from Oil & Gas due to the supply squeeze in natural gas and brent crude breaking to 3-year highs. Both BP (BP.) and Royal Dutch Shell (RDSB) have broken through key levels of resistance in recent sessions and we will continue to trade this sector on the long side this month.

Another sector showing strength is Banking which has put in a V-shaped recovery. Bond prices have fallen (yields risen) in recent weeks with markets on both sides of the Atlantic starting to price-in interest rate hikes to combat rising inflation.

We’re going to ignore the strength in Telecoms as this has been purely driven by a sharp recovery in Telecom Plus (TEP).

SECTOR WEAKNESS

Previously a standout performer, Housebuilding has starter to underperform as the Rishi Sunak’s stamp duty holiday and furlough scheme came to an end in Q3.

Consumer Defensive has continued to show weakness as rising inflation continues to weigh on profit margins.

And whilst a high inflation environment should be good news for Utilities, the sector has weakened considerably in recent weeks as Spain’s cabinet passed emergency measures to reduce sky-high energy bills by redirecting billions of euros in extraordinary profits from energy companies to consumers and capping increases in gas prices.

FTSE 100 Key Sector Snapshot