When I say “market peak” I am using the date of the peak in the US index, the S&P 500, on 20th February.
Before that date the UK stock market had a decent rally, and there appeared to be much potential in the domestic economy, albeit on a 5 years view – for example, the benefits of greater infrastructure spending do not occur overnight. This is why smaller company funds held up well as we entered February even as the more globally-influenced FTSE 100 index faltered a little. You can see this in table 1, from the election date to 20th February.
In table 2 this is broken out further, showing the best UK stock market funds between those two dates – smaller company funds dominate, plus some other funds with a Value-cum-cyclical bias.
Table 3 shows what happened after the February peak, at a sector level. Smaller companies are leading in the downturn, just as you should expect. Table 4 focusses on the worst performing individual funds over that same period.
Smaller companies certainly feature (four of the bottom 10), but the rest are a mix of recovery and Value funds – the sorts with thoughtful fund managers who actively manage their funds, because they believe they can make a difference. Right now they will be feeling pretty beaten up.
Nonetheless these are the sort of funds and fund managers who will be near the top of our buy list once there are reasons to believe the market is bottoming. In that first stage of the recovery we will be doing the opposite of what we normally do – buying beaten up quality funds, not going with momentum. We will be seeking out maximum bounceability.
Much more on that in coming weeks.
FURTHER READING
Table 1
UK Election to Feb 20th peak for S&P
|
|
Sector/index
|
Perf %
|
UK Smaller Companies
|
9.7
|
UK All Companies
|
5.1
|
UK Equity Income
|
4.2
|
FTSE 100
|
2.8
|
Table 2
UK Election to Feb 20th peak for S&P
|
|
|
Top 10
|
|
|
Fund
|
Sector
|
Perf %
|
Liontrust UK Micro Cap
|
UK Smaller Companies
|
15.6
|
Merian UK Smaller Companies Focus
|
UK Smaller Companies
|
14.8
|
Premier Ethical
|
UK All Companies
|
14.7
|
Threadneedle UK Smaller Companies
|
UK Smaller Companies
|
14.3
|
Premier UK Growth
|
UK All Companies
|
14.2
|
LF Gresham House UK Micro Cap
|
UK Smaller Companies
|
13.8
|
JPM UK Smaller Companies
|
UK Smaller Companies
|
13.1
|
BlackRock UK Smaller Companies
|
UK Smaller Companies
|
13.1
|
LF Miton UK Value Opportunities
|
UK All Companies
|
12.9
|
Merian UK Mid Cap
|
UK All Companies
|
12.9
|
Table 3
Feb 20th peak for S&P to now
|
|
Sector/index
|
Perf %
|
UK Smaller Companies
|
-36.8
|
UK All Companies
|
-33.7
|
UK Equity Income
|
-33.6
|
FTSE 100
|
-26.2
|
Table 4
Feb 20th peak for S&P to now
|
|
|
Bottom 10
|
|
|
Fund
|
Sector
|
Perf %
|
ASI UK Recovery Equity
|
UK All Companies
|
-47.6
|
ASI UK Unconstrained Equity
|
UK All Companies
|
-45.6
|
Aberforth UK Small Companies
|
UK Smaller Companies
|
-45.2
|
Schroder UK Mid 250
|
UK All Companies
|
-43.2
|
Merian UK Dynamic Equity
|
UK All Companies
|
-42.3
|
TM Cavendish Opportunities
|
UK All Companies
|
-42.2
|
Schroder UK Dynamic Smaller Companies
|
UK Smaller Companies
|
-41.9
|
ASI UK Ethical Equity
|
UK All Companies
|
-41.7
|
Merian UK Smaller Companies Focus
|
UK Smaller Companies
|
-41.4
|
VT Teviot UK Smaller Companies
|
UK Smaller Companies
|
-41.3
|
Data notes
UK General election 12/12/2019
S&P 500 peak: 20/2/2020
End date: 25/3/2020