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M&A activity boosts UK market
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 The UK stock market has been on something of a rollercoaster ride. Having started the year just under 5,700, the index had moved up above 6,100 by late April, only to lose these gains and more in the following two months.
By mid-June the index had sunk to 5,506 but, by early autumn, it had managed to drag itself back up beyond 6,000 again.
This volatility might seem surprising considering that the British economy has performed well, growing at its long-term average. Prospects for further growth also seem well supported and business investment has picked up after subdued growth last year.
But a number of uncertainties have unnerved investors. Back at the start of 2006 the pound weakened notably, manufacturing's tepid growth fell and the service sector turned sluggish. In addition, the housing market was flat, yet at this point the stock market continued its steady rise, seemingly oblivious. Why?
The answer was, partly, China, whose growth led to an insatiable demand for raw materials, making commodity prices - and the shares of mining companies - soar.
The Jupiter High Income Fund did well out of playing this trend in the early part of the year until valuations simply got too high and I closed out my profitable positions. The market's spring rise was been driven by M&A activity, with low interest rates encouraging private equity operators to snap up steady, cash-producing businesses, such as most of Britain's ports. Each bid not only raised its target's share price but gave the shares of other likely targets a nudge upwards too.
However, as happens on occasion, share prices got ahead of themselves and, with uncertainties over global growth on the rise, investors started to take profits in late April until mid-June when indices started to creep up again.
So where next? We should remind ourselves it is perfectly normal for stock markets to worry. Currently they are still concerned about when, and by how much, a sharp slowdown in the American housing market will dent economic growth in the US and, hence, other economies.
Personally, I am comfortable that shares can make further progress but we should not rule out a few nervous moments along the way.
Such an environment can, perversely, prove a good hunting ground for funds like the Jupiter High Income Fund which avoid the risks associated with glitzy 'growth' investing.
Instead, I concentrate on unglamorous, cash-generative businesses that have a high probability of producing modest but acceptable returns and so I spent much of the summer increasing our holdings in such companies.
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