Henderson High Income Trust plc

The FTSE All-Share Index returned 3.7%, as gains in energy stocks and some positive corporate results drove UK equities to a record high. Andy Burnham became the UK's seventh prime minister in 10 years and unexpectedly appointed John Healey, the former defence secretary, as Chancellor of the Exchequer. Mr Healey's appointment was viewed as more investor-friendly than some of his potential rivals for the job.

The Bank of England left its benchmark rate unchanged at 3.75%, while Governor Andrew Bailey's comments appeared to reduce the chances of an immediate rate hike. Annual inflation cooled to 2.6% in June, which was lower than expected.

The FTSE 100 Index rose 3.6% during the month, underperforming the mid-cap FTSE 250 Index which rose 4.5%. The best-performing sectors included energy, telecoms and technology, while the healthcare, utilities and consumer discretionary sectors lagged.

The equity holdings in Victrex, Michael Page and Standard Life all contributed to performance. Chemical company Victrex announced a good trading statement with better volume growth and greater pricing resilience than anticipated. Recruiter Michael Page also released a resilient trading statement which showed signs of recovery in employment markets in the US and Asia and some stabilisation in Europe. Shares in Standard Life performed well due to favourable broker research. The equity portfolio's underweight position in AstraZeneca also benefited relative performance as the shares were weak after the company reported disappointing trial data for one of its pipeline drugs.

Elsewhere, equity holdings in Vesuvius and British American Tobacco (BAT) detracted from performance. Vesuvius warned that its profits were expected to be below expectations for the year due to two separate operational issues. BAT's shares underperformed during the month as its interim results were slightly disappointing given the strong industry data previously reported.

During the month, we added new positions in Galliford Try and BT. Construction company Galliford Try typically benefits from strong demand for UK infrastructure and public sector projects, with its large order book, robust net cash position and improving margins supporting visibility over earnings and dividend growth. BT is nearing the end of the build-out of its broadband fibre network, meaning its capital expenditure (capex) may fall to more normal levels. In combination with improved operating efficiencies and reduced pension payments, we believe this has the potential to support improved free cash flow generation and dividend growth.

Although geopolitical tensions remain in the Middle East, if a peace deal can be agreed between Iran and the US, we think the oil price may remain closer to its pre-conflict level. This could potentially lead to lower inflation and reduce expectations of interest rate rises.

A change in prime minister has the potential to make UK equity investors nervous about plans for tax and spending. However, UK consumers, businesses and the banking system appear to be in strong financial health, which has supported the UK economy through periods of uncertainty in recent years.

In addition, the share prices of UK companies in general still appear attractive to us relative to other regions. We maintain a balanced approach, owning what we consider to be more resilient businesses as well as cyclical companies (those usually more dependent on a stronger economy for growth) that we think are attractively valued.