December’s top and bottom performing funds

Rob Morgan rounds up the notable fund sector trends in December as market turbulence resumed.

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  1. Rob Morgan

December proved to be largely devoid of festive cheer for investors. Following a promising start to the month, optimism surrounding trade talks between China and America quickly evaporated. Donald Trump and Xi Jinping agreed to put further tariffs on hold for three months, but sceptics were convinced heightened strains between the countries further down the line. As It turned out they didn’t have to wait long at all with Huawei’s Chief Financial Officer arrested in Canada at the request of the US for breaking Iranian sanctions.

The diplomatic row overshadowed what were already likely to be tough tariff discussions. The tribulations led to further losses in Asian markets while Japan’s Topix went into bear-market territory (defined as a fall of 20% from its most recent peak) on renewed fears that its export sector would be further affected. European markets fared little better – despite news that Italy had finally agreed a spending plan with the European Commission. In Germany, the DAX index also entered a bear market amid heightened concerns for the country’s manufacturers.

Any prospect of a seasonal ‘Santa rally’ was further dashed by the US Federal Reserve (Fed), which raised interest rates by 0.25 percentage points to a range between 2.25 and 2.5%. The rate hike was widely expected but markets were disappointed by the comments accompanying the Fed’s decision, albeit the central bank now expects two more increases next year instead of three. US equity indices lost further ground as commentators debated whether the Fed will raise too far for the economy to withstand. Given slowing growth elsewhere in the world investors are questioning how long the US economy can be immune.

In the UK, Brexit plans were plunged into further disarray with the Prime Minister scrapping the Parliamentary vote on her withdrawal agreement as it became apparent it would be rejected. Mrs May survived the ensuing vote of no confidence within the Conservative party, but it seems there is little chance her deal can prevail given an intransigent EU and opposition from all sides of the house.

As such the expensive possibility of a disorderly ‘no deal’ exit cannot be ruled out and sterling fell to an 18-month low against the US dollar. What is clear, however, is that the range of outcomes is very wide, especially with the European Court of Justice issuing its ruling that, in theory, the whole thing could be called off without the revocation of Article 50 having to be approved by the EU’s 27 members.

UK funds struggled, especially those exposed to smaller and medium-sized companies, which are perceived to be more acutely affected by Brexit uncertainty and any ensuing disorder. The retail sector looked particularly bleak with pain apparently spreading from the high street to web sales, too. ASOS, long an internet darling of the FTSE, plummeted 40% after heftily cutting its sales estimates for 2019.

The relatively few funds that delivered positive returns were mainly in perceived safe have areas such as UK Gilts. Gold was also in demand, not just from those with a traditional taste in Christmas gifts.

Although investors should be aware past performance is not a reliable indicator of future results, here are the top and bottom ten Investment Association (IA) funds and sectors for December 2018 in full:

Top 10 funds:

Bottom 10 funds:

Top 10 sectors:

Bottom 10 sectors:

Past performance is not a reliable indicator of future returns. Figures are shown on a % total return basis, bid to bid price with net income reinvested; Source: FE Analytics, data for December 2018: 30/11/2018 to 31/12/2018. Onshore and retail open-ended funds only.

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