September’s top and bottom performing funds

A round up of the notable market and fund sector trends in September as share markets struggled to make headway.

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  1. Rob Morgan

Global stock markets drifted downwards over the course of September as investors grappled with the implications of a fresh wave of Covid-19 cases in the US, mainland Europe and the UK. It casts a shadow on the economic outlook, particularly for consumer service sectors on the front-line such as retail, hospitality and travel. Meanwhile, a finely balanced and fractious US election approaches, and trade tensions between the US and China rumble on.

More positively, global monetary and fiscal stimulus remains extremely accommodative and efforts towards a Covid vaccine are progressing. Overall, though, investors are taking the more cautious stance of favouring sectors and businesses that are more insulated from the impact of Covid-19, notably digital, healthcare and fast-moving consumer goods companies. The financial impact of this infection has been severe, and the world is expected to see its deepest recession in 2020 since the Second World War, which has led to investors to search for the relatively small number of companies likely to see a net benefit.

There are still many areas of the world where the virus is still spreading and there are concerns about a second wave of the virus hitting during the winter months. Although local restrictions are being re-introduced, there appears to be no political appetite for the imposition of full lockdown measures in many parts of the world because of the economic consequences.

Bucking the negative trend, Japanese equity posted strong returns, especially those reflecting a bias towards growth and technology companies. The new Japanese Prime Minister, Yoshihide Suga, stressed continuity with his long serving predecessor, Shinzo Abe, and that he wished to press on with his policies. He highlighted the need for Japan to enter more fully into the digital revolution in areas such as health and education and announced he is setting up a new Digital Agency.

As I pointed out in a recent article, the trend of digitalisation is creating numerous growth opportunities for domestic Japanese businesses in a market ripe for disruption. Somewhat counterintuitively, large parts of Japanese society are behind the curve compared with the rest of the developed world with around 80% of payments still made in cash.

Among the weakest areas were traditional energy stocks as the oil price took a knock from the coronavirus ‘second wave’. Covid-19 has accelerated the world’s move to renewable energy, and to aid the economic recovery, subsidies, taxes and regulations are likely to increasingly direct capital to green outcomes. The EU has recently published its detailed programme for its Green Deal for the next ten years, Joe Biden is planning something similar for the US should he be elected, and the structural trend towards cleaner forms of energy was further underlined last week as President Xi Jinping announced that China will aim to hit peak emissions before 2030 and for carbon neutrality by 2060.

Gold was also weak, impacted by a stronger US dollar and an increasing sense that Central Banks are reaching the limits of their capabilities in terms of supporting economies through the current Covid slump. Meanwhile, US equities were dragged lower by energy and the highly valued technology sector, and UK shares were once again under pressure from the growing possibility of no-deal Brexit as well as heavy exposure to troubled sectors such as energy and financials.

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 September 2020 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 September 2020: 31/08/2019 to 30/09/2020. 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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