Being the only G7 country yet to rebound from the output lost since the pandemic, UK’s growth prospects for 2023 don’t help its cause. The last quarter of 2022 saw UK’s economy falling by 50 bps. As quoted in a CNBC article, the UK managed to avoid recession by the narrowest of margins.
The problems faced by the nation were not helped by the state of the housing market. The mortgage rates were up making it more difficult for the economy by causing a dent in the consumer’s spending power. The Russia-Ukraine war also piled up problems for the nation as the invasion saw oil prices soar, creating an energy crisis in the UK. The sanctions issued by the west and Russia’s response to the price cap, by cutting its March supply complicated the crisis.
UK’s labor market is also in a tight spot with labor supply falling. The country in early February saw nearly thousands of nurses and paramedics of the NHS walk out in protest. NHS is the world’s largest government-run health care system.
Per The Guardian, the UK is heavily dependent upon gas for its energy needs making it one of the worst-hit European nations by the rise in oil prices. The high energy prices were one of the key factors in the rate of inflation faced by the country. The hawkish stance of the Bank of England saw the interest rates reaching 4%, with many economists stating that there could be more interest rate hikes in order to tame inflation.
According to an IMF report, as quoted on the World Economic Forum, the UK is the only G7 country whose economy is set to contract in 2023. However, the country’s output is predicted to grow by 90 bps in 2024.
ETFs in Focus
The funds discussed below were up in the past few months, coming as a relief to the investors. Although the UK economy is in a crunch, these ETFs showed positive performances.
iShares MSCI United Kingdom Small-Cap ETF(EWUS – Free Report)
The iShares MSCI United Kingdom Small-Cap ETF seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the MSCI United Kingdom Small Cap Index. The fund holds 253 stocks in its basket with Industrials, Financials, Consumer Discretionary and Real Estate being the top 4 dominating sectors with a weight of 20.8%, 17.1%, 15.7% and 11.9%, respectively.
The fund has amassed $48.1 million in its asset base, charging an annual fee of 59 bps. Having a 30-day average trading volume of about 11,500 shares, the fund is up 7.51% year to date (as of Feb 24, 2023)
Franklin FTSE United Kingdom ETF (FLGB – Free Report)
The Franklin FTSE United Kingdom ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE UK RIC Capped Index which represents the performance of large and mid-sized companies in the United Kingdom. It holds a basket of 115 securities with Consumer Staples, Financials, Energy, Health Care, Materials and Industrials weighting double digits.
Being a passive fund, it charges a considerably low annual fee of 9 bps and has been able to manage about $554 million in its asset base. It has an average volume of about 121,200 shares traded. The fund was up 10.91% in the past three months.
iShares MSCI United Kingdom ETF (EWU – Free Report)
The iShares MSCI United Kingdom ETF seeks investment results that generally correspond to the price and yield performance of the MSCI United Kingdom Index. The fund holds 81 securities in its basket, with Consumer Staples and Financials being the top 2 sectors with a weight of 19.4% and 18.5%, respectively.
iShares MSCI United Kingdom ETF charges an annual fee of 50 bps while managing $3.32 billion in its asset base. The 30-day average volume of traded shares was about 1.73 million. The fund has gained 10.45% in the past three months and 6.8% year to date (as of Feb 24, 2023). It has Zacks ETF Rank of 3 (Hold).
First Trust United Kingdom AlphaDEX Fund (FKU – Free Report)
The First Trust United Kingdom AlphaDEX ETF seeks investment results that generally correspond to the price and yield, before the fees and expenses, of the NASDAQ AlphaDEX United Kingdom Index. The fund holds 76 securities in its basket with a tilt toward Consumer Discretionary, which has a 21.32% weight.
First Trust United Kingdom AlphaDEX ETF amassed about $24 million in its asset base. It charges about 80 bps in annual fees with a 30-day average volume of 10,238 traded shares. The fund has added 13.04% in the past three months and 9.21% year to date (as of Feb 24, 2023).
