The FTSE 250 has experienced a volatile 2023 thus far — starting the year at 19,134 points, rising to 20,615 points by the start of February — and then falling to a 2023 low of 17,899 points towards the end of August.

Despite recovering to 18,625 points today, the UK’s domestically focused index remains down by circa 2.7% year-to-date.

This is a comparatively weak performance — the FTSE 100 is up by 1.7%, the S&P 500 up by 16.4%, and the ASX 200 up by 4.1% over the same period. But in a monetary era where NS&I is offering 6.2% returns risk-free, while simultaneously the UK’s economy continues to be unpredictable, this relative underperformance is perhaps understandable.

However, where an entire index is dragged down, there can be excellent value opportunities affected by wider negative sentiment.

But there is still macroeconomic uncertainty. 64 out of 65 economists polled by Reuters over the past few days think that the Bank of England will increase the base rate by a further 25 basis points to 5.5%. This near unanimity is supported by a general expectation that CPI inflation could rise slightly when figures are released on Wednesday.

On the other hand, GDP data shows that the UK economy shrink by 0.5% in July, while the unemployment rate is up to 4.3% from 3.8% in just three months. The Bank’s mandate means it must balance keeping inflation in check with preventing a recession — and therefore, a further increase is not guaranteed.

For context, Governor Andrew Bailey thinks inflation should still fall ‘markedly’ by the end of 2023, with rates ‘much nearer now to the top of the cycle. Nevertheless, MPC member Catherine Mann has warned that she would ‘rather err on the side of tightening.’

And then there’s the fiscal side to consider, with the Chancellor’s Autumn Statement on 22 November. Rising rates may have wiped out any potential fiscal headroom, though pressure to announce some financial sweeteners for hard-pressed businesses and consumers will be intense.

Best FTSE 250 shares to watch

1. Games Workshop

Games Workshop shares have risen by 59% over the past year, and its brief 15 September trading update could indicate further upside to come.

Ahead of the AGM, the company enthused that trading was ‘ahead of the Board’s expectations,’ with core revenue for the three months to 27 August coming in at circa £121 million, up from £106 million in the same period last year, while licensing revenue doubled to £6 million.

Accordingly, profit before tax has been estimated at circa £57 million, an £18 million increase reflecting ‘healthy growth across all channels.’

The company also declared yet another dividend — this time worth 50p per share — bringing the dividend so far this year to £1.95 per share. When you consider last financial year’s dividend was £1.20 per share in total, and that the company only distributes ‘truly surplus cash,’ Games Workshop could be an excellent FTSE 250 choice for next month.

2. Hilton Food

Hilton Food shares have risen sharply after announcing it has signed a deal with market titan Walmart to supply the company’s Canada-based shops. The food packaging company will now build a new manufacturing plant in eastern Canada which will deliver mostly meat-based products to Walmart supercentres.

This will be debt-funded through a new subsidiary, with robotics-based picking hoped to start in 2026. The company notes that the deal ‘represents a significant step forward’ for both businesses to help meet the growing demand in Canda for high quality meat products.

CEO Steve Murrells enthuses that ‘Hilton Foods and Walmart share the same high standards of sustainability, and we are looking forward to providing Walmart with the service and range of quality products for which Hilton Foods is known.’

This announcement came hot on the heels of relatively positive half-year results, which saw sales at the FTSE 250 company rise by 5.2% to £2.1 billion during the 28 weeks to 16 July, despite adjusted pre-tax profits falling sharply.

3. Grainger

Grainger shares have dipped by 7.8% year-to-date as one of the UK’s largest listed landlords comes under pressure from the wider macroeconomic environment.

Grainger rents out circa 10,000 properties to tenants, offering several advantages over typical smaller landlords, such as tenancies lasting up to three years rather than the standard six months. While this can reduce flexibility, it’s also a significant benefit for renters looking for security of tenure. Indeed, the FTSE 250 company even won the 2023 RESI Awards Landlord of the Year award.

Given the expense and complexity of entering the buy-to-let market, Grainger could be an attractive investor alternative. Hamptons now notes that the cost of renting has risen by 12% year-on-year, a growth rate at near record highs, with average rent for a new contract now stands at £1,300 per month.

In half-year results to 31 March, net rental income rose by 12% with occupancy at an industry-beating 98.5%.

CEO Helen Gordon noted that ‘with positive expectations for the occupational market and rental growth, resilience in valuations backed by strong active investor demand, and an institutional landlord-friendly investment landscape, the outlook for Grainger remains strong as we continue to lead the sector.’

4. Trainline

Trainline shares recently enjoyed solid half-year results, with ticket sales up sharply to £2.6 billion in the six months to the end of August — and revenue rising by 19% to £197 million.

The UK market was strong, with ticket sales rising by 19% to £1.7 billion as travellers move from paper to digital tickets, perhaps encouraged by under-fire government-backed proposals to shut down hundreds of ticket offices.

However, the company lost between £5 million and £6 million in sales from each strike day, and strikes are still ongoing. More encouragingly, demand in Italy and Spain saw international sales rise by 24% — and the company reiterated strong overall annual revenue guidance.

Trainline also launched a £50 million share buyback programme, and Canaccord Genuity analysts have remarked that high levels of free cash flow generation could see the FTSE 250 company create scope for up to £500 million of buybacks over the next five years.

As ‘the majority of the regulatory risk has subsided, with the key risk around commissions removed,’ the analysts maintain a ‘buy’ recommendation with a 271p target price.