BRIG Blackrock Income And Growth Investment Trust Plc

The information contained in this release was correct as at 31 December 2024. Information on the Company's up to date net asset values can be found on the London Stock Exchange Website at:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.

BLACKROCK INCOME & GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)

All information is at 31 December 2024 and unaudited.

Performance at month end with net income reinvested

BlackRock took over the investment management of the Company with effect from 1 April 2012.

At month end

Sterling:

Commenting on the markets, representing the Investment Manager noted:

Market Summary:

Equity markets struggled in December as global market selloffs and unwinds hit every part of the equity market. Early in the month, a rotation away from momentum stocks saw the S&P500 Index down by 0.6% and the Nasdaq down by 0.8%1, the worst 1-day move for momentum since February 2023, as the unwind was visible both intra-sector and geographically.

Inflation remained persistent in the US and UK markets, as the Bank of England announced that they were holding rates at 4.75%. This had been largely expected by the market2 as CPI inflation had ticked up from 2.3% in October 2024 to 2.6% in November 2024, and wage growth had accelerated. Meanwhile, the Federal Reserve (the Fed) cut rates by 25bps whilst indicating fewer rate cuts in 2025 as inflation continues to hold steadily above target.

In the US, the S&P500 Index returned -2.5%, as investors took profits in some of the year's biggest winners3, and the Fed's hawkish rate cut announcement saw markets selloff nearly 3% on the day.4 Equity markets priced two rate cuts for 2025 following the announcement, disappointing investors hoping for more cuts to fuel the bull market further. Market responses saw a reversal of some of the post-Trump sugar rush, as US domestic cyclicals and small caps underperformed.

In the UK, the FTSE All-Share Index returned -1.16% for the month, with materials and utilities leading the underperformance while financials were the only positively returning sector5, lifted by the prospect of fewer than expected rate cuts in 2025. However, the repricing of interest rate expectations crimped progress for the month, particularly hurting housebuilders and real estate companies.

The STOXX 600 Index ended the month -1.5% amidst political instability in the eurozone and the looming threat of US tariffs. The French government was toppled after a no-confidence vote early in December leading to the convergence of French and Greek borrowing costs due to increasing concerns for France's debt levels6. Economic growth remains weak, with the European Central Bank revising 2025 growth forecasts down from 1.3% to 1.1% in December.7

Stock comment

Tate & Lyle detracted from performance as the shares were weak during the month. Following rumours of potential bid interest in October, which resulted in a 15% rally in the shares, the shares gave back much of this during November and December given the lack of any bid. Segro, alongside the broader real estate sector, was also weak, as UK borrowing costs continued to rise following the budget.

The strength in Diageo, finishing a weak year strongly, negatively impacted the portfolio as it is not owned and similarly, being underweight to HSBC also negatively impacted performance.

Pearson contributed to performance as the shares continued their strong run since results in November as markets continued to respond favourably to the new CEO's strategy. Since being added to the portfolio in 2021, the shares have performed strongly as the company continues to migrate to higher value services. Admiral also contributed modestly to performance as shares rebounded slightly from previous weakness.

Not owning shares in Ashtead, Experian and Glencore all contributed to performance given their share price falls during the month. The profit warning from Ashtead crystallised our concerns on weaker growth, which is why we exited the shares earlier in the year.

Changes

The rise of borrowing costs in the UK has led to dislocation in share prices in certain areas which have provided opportunities. Amongst these, the Company added to positions in WH Smith, Big Yellow Group and Phoenix following weakness in share prices.

Conversely, to fund these, the Company has exited of its position in Hammerson. Albeit small, Hammerson was a recent purchase in 2024 and its sale is a function of portfolio positioning. This moderates the overweight position in real estate, given higher borrowing costs, whilst giving us the opportunity to re-invest in those positions where we have greatest conviction.

Outlook

Global developed equity markets continued their broad rallies throughout 2024 following a trend that started in late 2023. Following a lengthy period of uncertainty through the COVID-19 era, with sharply rising interest rates and inflation, equity markets have now settled down. Having passed peak interest rates, and with stable labour markets and broadly stable macroeconomic conditions, equity markets have performed strongly. The promise of greater fiscal spending in the US, China and parts of Europe have served to buoy equity markets further despite contributing to rising government bond yields as the spectre of uncontrolled fiscal deficits and inflationary pressures loom large for bond investors.

Following a period of extended economic weakness, the Chinese Government has begun a more concerted campaign aimed at accelerating economic growth and arresting deflationary pressures. Recent policy moves have sought to improve and encourage lending into the real economy with a sizable fiscal easing programme announced. Whilst the scale of the easing is large, western markets and commentators have remained sceptical of its impact and effectiveness whilst awaiting evidence to the contrary. In the UK, the recent budget promised and delivered a large-scale borrowing and spending plan whilst sizable increases in minimum wage and public sector wage agreements likely support a brighter picture for the UK consumer. UK labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presents a challenge to corporate profit margins.

With the UK's election and budget now over, the market's attention will focus on the subsequent policy actions of the new US administration under Donald Trump. The global economy has benefited from the significant growth and deflation `dividend' it has received from globalisation over the past decades. The impact of a more protectionist US approach and the potential implementation of tariffs may challenge this dividend. We would anticipate asset markets to be wary of these policies until there is more clarity as we move through 2025. Conversely, we believe political certainty, now evident in the UK, will be helpful for the UK and address the UK's elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolios for any election or geopolitical outcome, we are mindful of the potential volatility and the opportunities that may result, some of which have started to emerge.

The UK stock market continues to remain depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation anomaly saw further reactions from UK corporates with a robust buyback yield of the UK market. Combining this with a dividend yield of 3.6% (FTSE All Share Index yield as at 31 December 2024; source: FT), the cash return of the UK market is attractive in absolute terms and higher than other developed markets. Although we anticipate further volatility ahead, we believe that risk appetite will return, and opportunities are emerging. We have identified several potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

We continue to focus the portfolio on cash generative businesses that we believe offer durable, competitive advantages as we believe these companies are best placed to drive returns over the long term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create; by seeking to identify the companies that strengthen their long-term prospects as well as attractive turnaround situations.

1Source: Sherwood News, 9th December 2024 < Momentum unwind sinks US stocks - Sherwood News >

2Source: Money Week, 2nd January 2024 < December interest rates: Bank of England keeps rates on hold | Moneyweek >

3Source: CNBC, 31st December 2024 < Stock market today: Live updates >

4Source: J.P. Morgan, 19th December 2024 < December 2024 Fed Meeting: Fed Cuts Rates By 25 Basis Points to Bolster Labor Market, Triggering Market Shifts | J.P. Morgan >

5Source: BlackRock 2024 < Source: BlackRock 06/01/2025 >

6Source: Reuters, 2nd December 2024 <Budget woes push French borrowing costs above crisis-scarred Greece | Reuters >

7Source: European Central Bank, 18th December 2024 < The euro area outlook and monetary policy >

23 January 2025

ENDS

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