As we all know, past returns are not always a guide to future results however it is always interesting to look at how asset classes and sectors are performing during the year and try to make sense out of these moves. By looking at this data we can analyse the trend and also try to catch up any undervalued markets which we might want to re-position our portfolio into.
From a sector perspective, without any doubt the best class this year has been Technology with the S&P 500 Technology index up by 16.8%. Other sectors which are doing very well are Consumer Discretionary (+15.1%) and Healthcare (+8.8%). Consumer Discretionary numbers come to no surprise as with more economic growth comes more spending in non-essentials whilst for Healthcare more specialised drugs and medical equipment becomes more affordable which increases the demand.
The worst sector is Telecommunications (-7.7%) with one reason being higher interest rates which are pushing investors away from these stocks that previously used to attract dividend hungry investors in a low rate environment. Another bad performing sector is Consumer Staples (-6.7%) which is the antagonist of discretionary as it includes essential products for day to day need so again here we notice a cyclical feature as the economy continues to grow.
When we look at country & regional data it is actually India who is faring the best with a performance of +11.7% helped by a sliding Rupee but also recent key tech innovations and policy initiatives to become a 'digital' economy. The S&P 500 broad sector index is just up 6.7% whilst the first European country on the list is Netherlands with +5.1% and with Europe overall just up a mere 0.2% driven by geo-political tensions. Trade wars rhetoric is definitely harming China with its main Shanghai Composite index down 15.5% making it the worst stock market for the year.
When we include non-traditional investments, the best performing asset class is represented by Wheat futures, with a whopping +32%, driven by stronger demand and drought across Europe.
Keeping an eye on the market is always beneficial when constructing our portfolios and it also gives us an edge to make the right decisions when moving from one investment to the next.
All returns quoted are in USD and as at 9th August 2018. Data source Wall Street Journal.
Past performance is not a guide to future results. This information is being provided solely for information purposes and should not be deemed or construed as investment advice, advice concerning particular investments, advice concerning investment decisions, tax or legal advice. Similarly, any views or opinions expressed are not intended and should not be construed as investment, tax and/or legal recommendations or advice. No person should act upon any opinion and/or information in this document without first obtaining professional advice.