What’s Hot? Small Caps Mixed, Emerging Markets Emerge [sector edition]

UK and European sectors have struggled in the last month, along with property.

What’s Hot

• The bounce in US smaller companies has had many a commentator jumping on the bull market bandwagon.  The reality is less exciting…
• …They were down 25% at worst from the 2021 peak, and remain down 17%.  More in the next teleconference.  Ditto on the main North American sector.
• UK index-linked gilts appear regularly in this feature, though mostly as duds.  Avoid – unless you have some insight which we do not.
• The appearance of two emerging market sectors is much more interesting.
• Emerging market equities are cheap.  They normally respond better to a cheaper dollar, but have bounced despite a firm dollar. 
• It is similar for emerging market bonds, which are also, in many instances, not exposed to the high and rising interest rates and high inflation of the West.
• Try and find a space for emerging markets in your asset allocation.

What’s Not

• Two UK equity sectors, and a property sector with a UK focus, underpin how the mood in the UK has turned down in the last month.
• We can see great value in significant parts of the UK market.  But, unfortunately, what is cheap can get cheaper.
• Concerns over the economy have also hurt European smaller companies.  The sector was down 35% at worst from its 2021 peak, bounced into April 2023, and is now rolling over and down again – down 24% from the 2021 peak, and appearing to head lower.  Avoid.

What’s Hot

What’s Not

Performance 01/06/2023 – 27/06/2023

All performance figures quoted as total return in GBP