January’s top and bottom performing funds

A round up of the major fund and sector trends as the year got off to a turbulent start.

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  1. Rob Morgan

The momentum seen in stock markets at the end of last year continued into January, although there was a wobble at the end of the month as investors grew concerned over the spread of a deadly coronavirus, that started in China’s industrial heartlands. The reaction to the disease – with travel bans and businesses closing to protect their staff – is likely to hit China’s economic growth this year at a time when its economy is fragile. Growth in the Asian nation slipped to a 29-year low in 2019.

The timing of the virus, coinciding with the Chinese New Year, could hardly have been worse with people from all over China and the rest of the world travelling to spend holidays with family. Asian markets were among the worst affected by the deterioration in sentiment and specialist Chinese funds were among those falling the most over the month. Shares in Chinese airlines and travel businesses were particularly affected after authorities unveiled measures to limit the flow of people to and from Wuhan and instructed airlines to process refunds for flights to the city free of charge. Japanese markets were also impacted owing to a reliance on exports and links with China.

Meanwhile, in the West, the share prices of luxury goods companies such as Burberry, Hermes and Christian Dior parent LVMH were hit, as the Chinese market is a major driver of the sector. The valuation of US casinos such as Las Vegas Sands and Wynn Resorts were also affected, as they have sizeable operations in places such as Macau where many Chinese spend their holidays. At a sector level, more economically sensitive areas such as energy and mining receded.

Earlier on in the month markets were largely positive and US indices hit record highs. The technology sector was again relatively strong with investors tempted to chase growth where they see it in a world of low growth and low interest rates. There was also a sense of relief after the US and China signed a ‘phase one’ trade deal, signalling a significant de-escalation in the trade war between the nations. The deal removes China from the US list of ‘currency manipulators’, and in return, China has pledged to buy at least $200 billion more of US goods. A ‘phase two’ deal is set to cover technology and cyber-security issues – much more contentious areas – in later talks, so it remains to be seen how long the positive narrative will last.

There was also some more troubling news on global trade emanating from the World Economic Forum in Davos. During the gathering of policymakers and business leaders, Donald Trump declared the EU has “no choice” but to negotiate a new trade deal with the US, indicating that absent a trade deal, he would need to “take action” in the form of “very high tariffs on their cars and other things.” Meanwhile, the UK was told to hold fire on a new tax on big technology companies planned for April. US Treasury Secretary Steve Mnuchin threatened to “punish” the UK if it went ahead, but Chancellor Sajid Javid defied pressure and said he will not back down.

The performance of the UK stock market was relatively subdued, with the FTSE 100 falling by almost 3% excluding dividends. UK shares remains under-owned by global investors because of the remaining uncertainty around the Brexit process, though the economy was given a vote of confidence by the Bank of England as it held interest rates at its January meeting. Despite some in the market expecting a cut, signs of a post-election bounce were enough to dissuade most of the members of the Bank’s Monetary Policy Committee from voting for one.

Although investors should be aware past performance is not a reliable indicator of future results, here are the top and bottom ten funds and Investment Association* (IA) sector averages for January 2020 in full:

Top 10 funds:

Top 10 funds list in January 2020

Bottom 10 funds:

Bottom 10 funds list in January 2020

Top 10 sectors:

Top 10 sectors list in January 2020

Bottom 10 sectors:

Bottom 10 sectors list in January 2020

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 January 2020: 31/12/2019 to 31/01/2020. Onshore and retail open-ended funds only.

*There are around 3,000 funds on sale in the UK. The Investment Association divides these into nearly 40 ‘sectors’, broad groupings that help investors and advisers compare funds of similar types before looking in detail at individual funds.

 

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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