The chart shows the returns in local currency across a cross sample of major indices.
The table shows returns broken down by asset class and geography but this time in sterling. Sterling strengthening year to date has detracted from returns in overseas markets, in particular those from Japan where yen weakness versus sterling is down 7%.
The following table, with data courtesy of JPM Asset Management, shows the winners and losers in terms of industrial sector and style:
Dear me, markets like a new year to apply a volte face, don’t they? No sooner had the headlines about the death of UK equities been metaphorically scribed than they show some signs of life.
UK equities fared particularly poorly in 2020, with the FTSE100 down around 12% through a combination of a poor response to the pandemic, but also given the sector composition of the UK equity market being more old school, less new. Well, schools are back. For now at least. This can partly be explained by the same sector make up that had been such a headwind in 2020 as attention turns to the likely shape of the economic recovery. Energy and materials companies have benefitted from commodity price rises as well as an anticipated increase in demand as the economy comes out of its isolation. Financials, in particular bank shares, have been boosted by rising yields as their net interest income is perceived to be bolstered. Admittedly, these figures came in advance of anticipated write downs from losses suffered by some banks in their prime brokerage departments.
As the beginning of a cyclical recovery is anticipated, earnings recovery comes with it. Whilst many companies with a technology or stay-at-home bias could continue to grow their earnings through 2020, there are many sectors that could not such as energy (as consumption fell) or financials (as yields fell). Many of these sectors finished 2020 well below their January starting points and signs of a reversal in some of the headwinds they faced has been met with a swift repricing by markets. Companies in sectors that had previously struggled to generate growth, now offer the potential of earnings surprises.
Bricks and mortar commercial property returns for the year remain lacklustre with the likes of M&G Property posting small, but positive, return. We remain in regular contact with M&G about the prospect of the fund reopening to dealing and they have recently announced they hope to lift the suspension in dealing during the Q2.