Hedge Clippings | Friday, 18 February 2022
The world's a dangerous place, with Russia poised to invade Ukraine, having threatened to do so for some time. Why else would they amass 130,000 troops on the border if they weren't going to step, or fire, over it?
In spite of everything Comrade Putin might like to say, it's hardly likely Russian forces are there to repel an attack FROM Ukraine.
Hedge Clippings is certainly not well qualified to understand all the implications - be they political and strategic (given the USA, Europe and China's reactions will all play a part), economic and trade (sanctions) or military (hopefully limited). Whichever way each of those play out, financial markets are likely to remain, or become a whole lot more, volatile.
One would expect that volatility to continue - even before considering inflation, interest rates or a change in central bank policy.
As a result, the S&P500 is back to levels seen last July (and again briefly in September) while the NASDAQ is back to levels of 12 months ago. The ASX200, having peaked in early August and has traded broadly sideways for the balance of last year, is back at levels of May 2021.
In spite of the ASX200 falling 6.35% and the S&P500 losing 5.17% in January, 60% of the 413 equity-based funds in the FundMonitors.com database outperformed the ASX200, and 82% outperformed over the 12 months to January. However, there have been some significant performances from managed funds despite the overall direction of the market.
Looking at equity fund performances in January, the range between the best and worst returns was an extreme 25.93%, from +8.02% down to -17.91%, while over 3 years (annualised) it is equally large, from +33.79% to -0.24%, and over 5 years +24.74% to +0.36%. Not surprisingly, some of the best performers over 5 years found the going tough in January as valuations, particularly in growth stocks, came back towards earth.
For details on all funds: www.fundmonitors.com
Mind you, given the ASX200 only returned 9.44% in the 12 months to the end of January, compared with the return of 23.29% for the S&P500, it could be argued it was much "easier" for those funds investing locally to outperform. Only 27% of global equity funds outperformed the respective index.
As usual, the numbers re-enforce the value of stock-picking vs. index funds, and of course manager and fund selection, along with appropriate diversification, not only across manager and fund but also strategy, asset class, and geographic mandate.
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