US equity strategies, gold portfolios and UK index trackers are some of the funds that made the highest returns yesterday, as stock markets around the world surged.
Global stocks rallied hard yesterday as investors started to take cheer from the giant monetary and fiscal stimulus packages that have been announced to tackle the coronavirus crisis.
The FTSE 100 gained 9.05 per cent – or 452 points - during Tuesday’s session. While this still leaves the index someway off the heights it sat at several weeks ago, it represents its highest daily points gain ever as well as its second best percentage rise on record.
Markets across Europe performed strongly yesterday, while in the US the Dow Jones gained 11.37 per cent and the S&P 500 rose 9.38 per cent. Japan’s Nikkei 225 also rallied.
Performance of equity indices on 24 Mar 2020 (in local currencies)
Source: FE Analytics
Of course, one day of strong returns does not spell the end of a bear market and it still looks like investors are in for an extended period of increased volatility and losses.
Neil Wilson, chief market analyst at Markets.com, said: “You get these kind of mega-rallies when the market is heading lower. Therefore, as I keep saying, I’d prefer to see smaller daily swings to believe that stabilisation, or even a market bottom, has been established.
“The stimulus is now by and large in place, the question is whether it’s enough for the markets or whether the expected spike in cases and deaths in the US and Europe, combined with the emerging picture of the economic damage, means we need to take another leg lower before the bottom is found.”
Keeping this in mind – and remembering that past performance is no guide to future returns – Trustnet ran the numbers to find out which were the strong performing Investment Association funds in yesterday’s ‘mega-rally’.
Source: FE Analytics
As can be seen, US equity funds did well yesterday and Vanguard US Fundamental Value led the pack with a 12.77 per cent rise. At £14.7m its one of the smaller members of the IA North America sector, but larger peers like the £1.3bn MFS Meridian US Value and £2.6bn Baillie Gifford American funds can also been seen on the list.
Gold funds gained, following a bounce in the price of the yellow metal. Gold had been losing value during the coronavirus crisis but seems to have reacted well to news that the Federal Reserve’s bond-buying programme is now unlimited.
Craig Erlam, senior market analyst at OANDA Europe, said: “Gold is paring gains after soaring at the start of the week. Isn't it amazing what an enormous Fed stimulus package, including QE-infinity, can do.
“A week or so without staggering declines is also likely aiding gold's ascent, with the yellow metal having been battered by the need to cover margin and losses elsewhere. The big downside risk remains the potential for those sharp sell-off's in equity markets to be repeated, especially following yesterday's huge rally, with the market leaving itself open to more panic selling.”
UK equities also performed strongly yesterday and many of the highest returning funds are index trackers, led by Vanguard FTSE UK Equity Income Index and its 9.66 per cent return.
Some active UK strategies can also be seen on the list, however, with Aviva Investors UK Listed Equity Unconstrained being the day’s best performer in the IA UK All Companies sector. It takes a value approach.
Some 72 per cent of the Investment Association universe made a positive return yesterday but the table below shows the 25 that posted the biggest losses.
Source: FE Analytics