June’s top and bottom performing funds

A round up of the notable market and fund sector trends in June as the developed world started to relax Covid-19 lockdowns.

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  1. Rob Morgan

Following a strong recovery in April and May from the lows of March, stock markets were more range-bound in June, tempered by growing doubts of a ‘V’-shaped economic recovery and the possibility of ‘second waves’ of Covid-19 infections. Even as countries pare back economic and social restrictions, the virus continues to spread rapidly. Total reported cases have passed 10 million worldwide and the number of deaths has surpassed half a million.

Lockdowns may have been eased too early in some regions, with cases rising in some US states and in some Latin American countries. Even in areas that have successfully contained the virus, day-to-day life is far from normal and the financial and psychological scars that the crisis will leave on the global economy are likely to be material. Investors have been balancing these unnerving effects against the huge fiscal and monetary response from governments and central banks, which is serving to underpin asset prices.

Central banks around the world have been using all the tools in their armoury. They have cut interest rates and are lending freely to banks, other financial institutions and foreign central banks. The US Federal Reserve is also buying corporate bonds and they are encouraging commercial banks to extend credit to companies adversely affected by the crisis. The US central bank has pledged to do everything possible to support the country’s economy.

The financial impact of the infection is only now being revealed in data and corporate earnings, which come with a time lag, but the world is expected to see its deepest recession in 2020 since the Second World War. The US economy is expected to shrink by about 5%, with the UK predicted to contract about 10%. Some sectors have been hit particularly hard. These include travel and leisure businesses, as aircraft remain grounded and pubs and restaurants stay closed. Shoppers have increasingly moved to online retailers, accelerating the problems faced by many high-street chains which have higher fixed costs and tax bills.

There are some sectors that have emerged as winners. The fact that more people are working from home means that the internet security sector has seen solid demand for its products and companies associated with managing data have also performed well. The apparent advantages for technology companies helped the Nasdaq Composite, the US index of technology and growth companies, hit a new all-time high in June.

Chinese and broader Asian and Global Emerging Markets funds were among the strongest performers over the month, partly spurred on by encouraging economic activity data from China. It is also perceived that Asian societies where people are used to governments knowing a lot about them are likely to be better equipped to intercept virus carriers more quickly and demand the isolation of carriers and contacts rather than the whole of society. Funds with a bias to the large internet and technology names in the region benefited from their outperformance.

European markets also fared relatively well owing to better-than-expected economic data and the announcement of greater stimulus by the EU and Germany. The European Central Bank boosted and extended its quantitative easing programme (creating money to buy bonds in the open market) by €600 billion to €1.35 trillion and the purchases will continue for at least a year.

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 June 2020 in full:

Top 10 funds:

Bottom 10 funds:

Top 10 sector averages:

Bottom 10 sector average:

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 June 2020: 31/05/2019 to 30/06/2020. 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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