After the market turmoil created by the coronavirus epidemic in March, stocks markets have started their long recovery. After heavy falls in March, the FTSE 100 climbed around 8% in April and the tech-heavy Nasdaq index soared 20%.
Equity funds enjoyed the start of a recovery in the month as many opportunistic investors took the chance to top up their holdings after share prices reached lows not seen in decades. According to Morningstar Direct, the average equity fund delivered a positive return of 8.6%,. Meanwhile, commodity funds were down an average of 5.5% in a month where oil demand fell off a cliff and the price of the black stuff briefly turned negative as suppliers struggled to offload the commodity.
But equities are not the only asset class in positive territory. Four of seven asset classes delivered a positive return in April: equities, allocation, convertibles and fixed income, indicated by the green rectangles in the below heatmap. The chart shows the returns of each asset class in April, with the size of the box enoted by the amount of assets under management in the group.
Allocation funds were up an average of 4.5%. These multi-asset funds are mostly composed of equities and bonds, and this diversification often makes them an attractive option at times of uncertainty. Meanwhile, convertibles and fixed income were up 3.6% and 1.4% respectively. Properties funds were in negative territory, down an average of 1.8%, with many of the funds in the group still suspended.
March vs April
The U-turn in performance between March and April is one that many investors will remember in years to come. The below chart shows the sharp turnaround enjoyed by many asset groups. While money markets and property funds were the only two assets classes in positive territory in March, things have completely changed in April.
March saw one of the biggest falls in history, with many stock markets down more than 20%. During the month, funds also suffered some of the worst outflows in history, comparable only to October 2008. Investors withdrew an eye-watering £8.7 billion from funds in March as the Covid-19 crisis sparked widespread panic. But April, instead, rewarded those investors who did not succumb to panic-selling.
This time of year is one where many investors often follow the adage to sell their investments in May and go away until St Leger's Day in September, but doing so in 2020 could mean missing out on any continued bounceback.
