Market Overview

Dear Investor,

Gold hit a fresh record high this week, reaching $2,740.37 per troy ounce, driven by a perfect storm of global factors…

Additionally, gold-backed ETFs have seen five consecutive months of inflows from May to September 2024, as Western investors look for security amid uncertainty. The approaching US presidential election has further heightened market volatility, adding yet another catalyst for gold’s rise.

Silver, too, is benefitting from gold’s rally. Prices have hit a near 12-year peak, reflecting both a tight supply and increased demand, particularly in industries like electronics and photovoltaic cells. The upward momentum in the broader precious metals market has clearly spilled over into silver.

While gold’s rise appears unstoppable for now, it’s important to remember that commodity prices, by nature, are cyclical. Long-term investors should be mindful of this tendency, especially when considering entry points during all-time highs.

Wishing you a fantastic weekend,

Tom

Market Movers

On the rise: Morgan Sindall (LSE:MGNS) +18.4% on the week

Shares in construction company Morgan Sindall surged higher this week following an upbeat trading update that revealed the Group’s full-year results for 2024 are expected to significantly exceed previous forecasts. The strong performance was driven primarily by exceptional profit growth in its Fit Out division, which continues to outperform expectations.

Morgan Sindall’s Partnership Housing division also exceeded expectations, thanks to its growing long-term collaborations with the public sector. Despite subdued trading in its Mixed Use Partnerships division, the Group has secured several key contracts, reinforcing its pipeline of future work.

The Construction and Infrastructure divisions are on track to meet their revenue and margin targets, while the remediation plan for Property Services remains on schedule, promising a return to profitability by 2025.

Overall, the market’s bullish reaction highlights investor optimism surrounding the company’s growth prospects and robust financial position heading into 2024.

REGENCY VIEW:

Morgan Sindall is a high-quality company that boasts a share price and valuation to match its strong performance, reflected in a PE ratio of 14.6 and a return on equity of 22.7%. With a solid order book and positive growth trajectory, it positions itself well for sustained profitability.

On the slide: abrdn (LSE:ABDN) -18.2% on the week

Abrdn, formerly known as Standard Life Aberdeen, has faced a challenging week as its shares took a sharp tumble following disappointing updates from its key divisions.

Adding to the concerns, the Adviser platform saw elevated outflows, reflecting both market competition and a need for improvements in service quality. Despite management’s efforts to address these issues, including strategic re-pricing, investment in technology, and leadership changes, the pace of the turnaround has been slower than anticipated. This was compounded by a cautious outlook for the remainder of 2024, with the company’s transformation programme still in progress and cost-saving initiatives expected to take more time to yield results.

The one bright spot in abrdn’s performance was the sustained growth in its interactive investor (ii) platform, which saw a 13% increase in AUMA YTD and continued organic customer growth. However, this wasn’t enough to offset the broader concerns around the company’s core operations, leading to a significant drop in investor confidence and a sharp decline in the share price.

REGENCY VIEW:

Abrdn’s shares have taken a significant hit, reflecting ongoing revenue challenges and subdued growth prospects, with a forecast P/E ratio of 12.3 and sluggish EPS growth of just 3.6%. However, the stock’s high dividend yield of 8.91% and relatively low Price to Book of 0.59, could attract income-focused investors despite the company’s operational struggles.

Sector Snapshot

This week’s sector snapshot highlights broad-based weakness across the UK stock market, with five sectors posting losses greater than 2%. Real Estate has taken the hardest hit, led by declines in property REITs like British Land and Land Securities. Meanwhile, Energy and Materials have shown relative strength, stabilising after recent sell-offs. While Materials managed to edge slightly into positive territory, the broader market remains under pressure.

UK Price Action

Last week, we pointed out that the FTSE’s breakout lacked the support of rising volume and was up against strong resistance. So, it’s no surprise the index has drifted back into its previous range this week.