Investors found themselves seeking direction once again in the second quarter of the year as the last three months turned out to be very different from the three that preceded them.
A strong start to the year gave way to greater uncertainty as US president Donald Trump ramped up the prospect of a trade war with China.
Meanwhile, the Brexit saga continued, with UK prime minister Theresa May stepping down after failing to secure backing for her deal from parliament, raising the prospect of a more hard-line colleague taking over negotiations.
Below, using a series of charts from FE Analytics, we highlight the areas where returns were made during 2019’s second quarter.
Asset classes
Higher volatility during the second quarter of the year saw more subdued returns from global equity markets, with the MSCI AC World up by just 6.08 per cent.
However, increased levels of uncertainty – largely caused by the resurrected prospects of a trade war – helped the GSCI Gold Spot index rise by 11.61 per cent.
Performance of asset classes over Q2 2019
Source: FE Analytics
Geographies
While out of favour with some international asset allocators, according to the most recent Bank of America Merrill Lynch Global Fund Manager Survey, the best performing geography for equity during the second quarter was Europe, with the Euro Stoxx index up by 8.86 per cent.
However, it should be noted that the euro was up by 3.84 per cent against sterling during the quarter, as Theresa May announced her resignation.
Performance of regions over Q2 2019
Source: FE Analytics
As such the FTSE All Share index was subdued, rising by just 3.26 per cent over the quarter. Growth in the MSCI Emerging Markets and the Japanese Topix was also subdued. The S&P 500 index, however, was up by 6.63 per cent.
Investment Style
Both the growth and momentum styles powered ahead during the second quarter, continuing the long-term market trends witnessed in recent years.
Performance of styles over Q2 2019
Source: FE Analytics
The MSCI AC World Growth index was up by 7.4 per cent, while the MSCI ACWI Momentum style index was up by 8.16 per cent. Meanwhile, the MSCI AC World Value index continued to lag, rising by just 4.73 per cent.
Industries
The financial services sector emerged as the biggest winner of the quarter, while consumer goods, telecommunications and utilities all saw losses.
Performance of FTSE industries over Q2 2019
Source: FE Analytics
The FTSE All Share Financial Services index was up by 11.12 per cent, while the FTSE All Share Technology index – one of the strongest sector themes of the past decade – also performed well, with a return of 9.88 per cent.
The worst performer was FTSE All Share Telecommunications, which fell by 6.43 per cent.
Equity funds
Looking at funds, data from FE Analytics reveals that the best-performing equity sector of the quarter was IA Europe ex UK, where the average fund was up by 8.49 per cent.
The top performer was the £547.3m LF Miton European Opportunities fund, managed by Carlos Moreno and Thomas Brown, which returned 13.63 per cent.
There were numerous funds that made double-digit returns and several with gains of more than 13 per cent, including: Threadneedle European Select (up 13.47 per cent), Quilter Investors Europe (ex UK) Equity Growth (13.18 per cent), Baillie Gifford European (13.16 per cent), and Legg Mason IF Martin Currie European Unconstrained (13.09 per cent).
Performance of sectors over Q2 2019
Source: FE Analytics
The next best-performing equity sector was IA North America, up by 6.78 per cent. It was led by Marlborough US Multi Cap Income, managed by Brad Gardner and Brad Weafer, which made a total return of 13.75 per cent.
Bond funds
Among fixed income strategies, the best performing sector was IA Global Emerging Markets Bond, which was up by 6.89 per cent over the quarter.
The sector’s best performer was Eric Wong’s $203bn Fidelity Emerging Market Debt fund, which was up by 12.83 per cent. Other top performers included Threadneedle Emerging Market Local (up 9.65 per cent), PIMCO GIS Emerging Local Bond (9.24 per cent), Investec Emerging Markets Local Currency Debt (9.07 per cent), Oppenheimer Emerging Markets Local Debt (9.01 per cent) and Barings Emerging Markets Local Debt (9 per cent).
Performance of sectors over Q2 2019
Source: FE Analytics
The IA Global Bonds sector also performed strongly with a 4.68 per cent total return. The best performer here was the four FE Crown-rated PIMCO GIS Euro Long Average Duration EUR fund, managed by Andrew Balls and Lorenzo Pagani, which made a total return of 11.07 per cent.
Multi-asset and specialist funds
The two stand-out performers from the multi-asset and specialist sectors last quarter were IA Technology & Telecommunications and IA Specialist, making total returns of 5.55 per cent and 5.18 per cent, respectively.
The best active IA Technology & Telecommunications fund over the quarter was Aberdeen Standard Sicav I Technology Equity, which made a total return of 8.1 per cent.
From the IA Specialist sector, several Russia and eastern European strategies were among the top performers, with BlackRock GF Emerging Europe topping the tables after making a total return of 19.50 per cent.
Performance of sectors over Q2 2019
Source: FE Analytics
The best performing multi-asset sectors were those with the greatest equity allocations, with IA Mixed Investment 40-85% Shares up by 4.2 per cent. The IA Flexible Investment sector – home to multi-asset funds that can hold up to 100 per cent of their portfolio in equities – was up by 3.84 per cent.