Recruitment Stocks Jumped 81% and Took the FTSE 250 Through 24,000

July was the month the money came home. The FTSE 250 rose 4.2% to trade above 24,000 for the first time since September 2021, the FTSE 100 gained 3.5% to close the month at 10,905, and both did it while American technology was falling.

The rotation is the story. Over the same four weeks the S&P 500 was flat and the Nasdaq 100 fell 6.5%, while the UK’s blue-chip index posted the best performance of Europe’s major benchmarks, according to interactive investor’s month-end review using ShareScope data.

Britain beat America, briefly

A UK index outperforming the Nasdaq by roughly ten percentage points in a month is unusual enough to be worth stating plainly, and unusual enough to be worth not over-reading.

The FTSE 100 is heavily weighted toward energy, banks, miners and pharmaceuticals. It has no meaningful exposure to the handful of American companies that have driven global index returns for three years. That composition has been a persistent drag whenever technology led, and it becomes an advantage in exactly the months technology falls.

This was one of those months, and it followed a period when chip stocks fell 21% even as AI capital spending hit a record. When the most crowded trade in the world takes a pause, an index full of what nobody wanted looks briefly excellent.

The FTSE 100 was still comfortably beaten by the Hang Seng, which rebounded 13.1% after a June slump. Relative performance in a single month describes a rotation, not a re-rating.

Why the mid-cap index is the one to watch

The two indices are often quoted together as though they measured the same thing. They do not, and the difference is the reason July’s move matters.

The London Stock Exchange‘s blue-chip index is dominated by multinationals whose customers are mostly not British. July’s own leader board makes the point: BP and Shell sell oil and gas priced in dollars, Fresnillo mines silver in Mexico, AstraZeneca sells medicines worldwide. A great deal of the FTSE 100’s earnings has very little to do with conditions in the UK, which is why the index can rise while the domestic economy is flat, and why sterling weakness tends to help it.

The FTSE 250 is different in composition. It holds far more companies whose revenue comes from British customers: domestic services, mid-sized industrials, retailers, property, and recruiters placing people into British jobs. That makes it a much closer proxy for what investors think is about to happen inside the UK economy.

This is why the two indices carry different information. A rising FTSE 100 can mean a falling pound, a strong oil price or an American technology sell-off pushing money into value. A rising FTSE 250 usually means somebody is buying Britain.

It is also why the mid-cap index spent so long depressed. It has underperformed for years, and it went into late March at the year’s low. Money leaving UK-focused equities is a slow, persistent process; money returning to them tends to be abrupt, because the shares are thin enough that a change of mind moves prices quickly.

Both features were on display in July, in the same set of numbers.

The leaders were the most heavily sold

Inside the FTSE 250 the pattern is sharper still. The two largest gainers were recruiters: Hays rose 81% and Page Group 71%.

Those are extraordinary monthly moves for established companies, and the second number in each row explains them. Over twelve months Hays is still down 4.3%, and Page Group is still down 28%. A stock can rise 81% in a month and remain cheaper than it was a year ago only if it fell a very long way first.

That is what happened. Recruitment is among the most cyclical businesses in any market: fee income depends on companies choosing to hire, and hiring is the first thing deferred when management teams get nervous. Both firms had been sold heavily through a period of weak UK hiring, and July repriced them.

The mid-cap index as a whole now stands 14% above its low point in late March, which is a substantial recovery from a genuinely depressed base.

What a forward P/E of 52.9 is telling you

The most informative figure in the table is the one nobody leads with. After its rally, Hays trades on a forward price-to-earnings ratio of 52.9. Page Group is on 36.4.

For context, BP in the same table sits on 7.8 and Shell on 8.2.

A forward P/E is the share price divided by expected earnings per share. A number above 50 for a recruitment firm does not mean the market thinks it is a growth company. It means the price has recovered while the earnings have not, so the ratio between them has become extreme. Investors are paying today for profits they expect to arrive later.

That is a specific bet, and it is a bet on the UK labour market rather than on the companies themselves. Recruiters make money when firms hire, so buying Hays at 52 times forward earnings is a wager that hiring recovers enough to bring that multiple down to something ordinary.

The bet has not been won yet. UK hiring has been weak, and the same quarter’s data has businesses reporting deteriorating confidence even while they spend. If hiring does turn, these are among the most geared companies in the index to it. If it does not, an expensive multiple on depressed earnings is precisely the position an investor least wants to hold.

Takeovers did some of the work

Not every mid-cap gain was a bet on recovery. Rotork rose 65% and MITIE 39% after agreeing takeover deals, which is a different mechanism entirely: a bid puts a floor under a share price and revalues it to what an acquirer will pay rather than what the market previously would.

That fits the pattern we found earlier this quarter, with UK takeovers landing at premiums of up to 73%. When acquirers consistently pay far above the market price, the market price was arguably wrong, and the FTSE 250’s discount is part of what has drawn bidders in.

Funding Circle rose 49% on what was described as a standout half-year, which is the one large move in the index driven straightforwardly by trading performance. We looked at those figures when they landed, and the business had nearly quadrupled its profit lending to small firms. CMC Markets rose 46%.

What fell

The blue-chip laggards were led by AstraZeneca, down 10.4%, followed by Halma at -10.3%, Fresnillo at -9.7%, IAG at -9.6% and Scottish Mortgage at -9.5%.

The composition of that list matters. Scottish Mortgage holds growth and technology positions, so its fall is the Nasdaq’s fall arriving in a London listing. Fresnillo is a precious metals miner. AstraZeneca is the index’s pharmaceutical heavyweight. These are not casualties of a weak UK economy; they are the parts of the UK market that behave like something other than the UK market.

Meanwhile the blue-chip risers were Sage at 19.3%, Vodafone and BP both at 18.3%, Babcock at 17.8% and Shell at 15.4%. Energy and defence, in other words, alongside two domestic operators.

What would confirm it

One month of outperformance built on a technology pause, a takeover wave and a rally in the most heavily sold sector is not yet a change in how global investors regard UK equities.

What would confirm it is narrower and duller than the headline moves: recruiters growing fee income rather than merely re-rating, the FTSE 250 holding above 24,000 through a month when the Nasdaq rises, and takeover premiums narrowing because the market price has caught up with what buyers will pay.

Until then, July is best read as evidence that UK assets were cheap, which is a different and more modest claim than the argument that they have started to be treated as valuable.

About The Author

Will Lisil

Founder of MW3.biz, building technology that empowers creators and democratising access to digital tools.

See author's posts