May’s top and bottom performing funds

A round up of the notable fund sector trends in May.

This content is more than 6 months old now, please visit the news area of this site for more recent content

  1. Rob Morgan

Global share markets fell in May as trade negotiations between the US and China failed to reach a compromise, leading to further tariff announcements from both sides. The US raised punitive tariffs on $200bn of Chinese goods and Beijing responded in kind.

Previous rhetoric had suggested a deal was close to being finalised and a positive outcome had been discounted by investors. The apparent breakdown in talks therefore caught many market participants by surprise and led to growing concerns about the global economic outlook. The next opportunity for President Trump and President Xi Jinping to meet will be at the G20 summit in Osaka at the end of June, but both sides appear to be getting more entrenched in their positions.

Economically-sensitive stocks were therefore hit particularly hard during the month, while those offering relative stability and quality tended to outperform. Understandably, the worst performing area was China itself, but broader Asian and emerging market funds also saw steep falls.

Concerns spilled over into the tech sector as the US government added Chinese phone company Huawei to its ‘Entity List’ of companies that are believed to be a national security threat or operate against US foreign policy interests. US companies are not allowed to transfer technology to firms on the list, meaning that tech giants such as Alphabet can no longer licence apps to Huawei, a major player in the global smartphone market, and potentially it means US hardware firms can’t sell their components to the firm.

President Trump also turned the attention of trade threats towards Mexico. From 10 June, 5% tariffs will be levied on all Mexican exports to the US and this will increase to 25% by 1 October if Mexico doesn’t curb South American refugee movement across its border. The news sent the share prices of many auto companies – American, European and Japanese – lower because they have supply chains that would be affected.

Elsewhere, bucking the negative trend was the Indian market following the re-election of Narendra Modi as the country’s prime minister. Mr Modi’s landslide victory has given his Bharatiya Janata Party a strong mandate to continue with his reform agenda and was cheered by investors as he is seen as being generally supportive of business.

Another main theme for the month was the renewed fall in the pound. A lack of clarity on Brexit and the wider UK political situation weighed, with a new prime minister now expected to be announced in July. This was broadly helpful for many UK-listed multi-nationals (whose earnings benefit from sterling weakness) but a headwind domestically focused shares.

The European elections reaffirmed the polarised views of the UK electorate on Brexit. The results have no impact on the current Westminster arithmetic, but the effect on the Conservative party leadership race was important. Already a number of leading candidates have put their weight behind ‘no-deal ‘as a possible option, so this outcome is now seen by the market as more likely even though the collective will of parliament, as it currently stands, seems to be against it.

The most eye catching UK corporate news was Vodafone’s 40% dividend cut, which caused shares to fall by over 10%. It highlights some of the potential dividend sustainability issues affecting many larger UK companies; specifically, the need to invest in the future (in Vodafone’s case its 5G network) and bolster balance sheets while keeping income-seeking shareholders happy.

In a month of largely negative sentiment the strongest fund performance came from safe have areas such as UK gilts. With the Brexit situation still unresolved, it seems unlikely that interest rates will be increased in the UK any time soon. The US may also have reached the top of its cycle of interest rate rises and weakness in Europe has forced the European Central Bank to backtrack on its plans to tighten monetary policy. With the outlook for interest rates and inflation appearing muted, high-quality bonds fared well.

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 May 2019 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 May 2019: 30/04/2019 to 31/05/2019. Onshore and retail open-ended funds only.

More from author

  1. Rob Morgan

    Four ‘rugby players’ in your portfolio

    Fund Research - 4th Jun 2019 05:24am

    To mark the start of the Rugby World Cup, we describe how different investments can w...

  2. Rob Morgan

    Does your child have a forgotten £1,000 nest egg?

    Fund Research - 4th Jun 2019 05:24am

    Some parents may be unaware, or have lost the details, of children’s money held in Ch...

  3. Rob Morgan

    What is ‘active share’ and how can it help investors choose funds?

    Fund Research - 4th Jun 2019 05:24am

    Assessing how ‘different’ a fund is can help identify to what extent it can outperfor...

Most read articles

  1. May’s top and bottom performing funds

    What is ‘active share’ and how can it help investors choose funds?

    Fund Research - 4th Jun 2019 05:24am

    Assessing how ‘different’ a fund is can help identify to what extent it can outperfor...

  2. May’s top and bottom performing funds

    Woodford Equity Income Fund – how the portfolio is changing

    Fund Research - 4th Jun 2019 05:24am

    Manager is reshaping the portfolio towards more easily-traded stocks.

  3. May’s top and bottom performing funds

    August’s most widely bought and sold funds

    Fund Research - 4th Jun 2019 05:24am

    We reveal the funds most commonly bought and sold by customers using our investment p...

Investment involves risk. You may get back less than invested.