Q1 2019
The first quarter of 2019 witnessed a remarkable recovery for global equities, corporate bonds, and commodities, ranking among the best quarters in recent history.
The positive momentum in asset buying that started right after the Christmas break continued into the second quarter. This was largely driven by accommodating central banks, easing monetary policies, and less disruptive trade policies. The removal of the threat of a hard Brexit also made UK stocks more attractive, leading to a 9% rise in the FTSE 100 during the period.
Although there were casualties during the results reporting season, the overall sentiment remained positive. Weaker economic data from the US and Europe did not significantly impact investor confidence. However, the possibility of an economic cycle-ending event has not been established yet.
US equities experienced their highest first-quarter return since 1998 due to easing global trade tensions and accommodative central bank policies. European equities also rose as the European Central Bank announced the restart of its stimulus program in response to weakening economic data. Despite Brexit uncertainty, UK equities performed well as the deadline for Britain's departure passed and a no-deal Brexit was avoided.
Emerging markets rallied, with China leading the way, thanks to the easing of the US-China trade dispute, local government support through tax cuts, and MSCI's decision to include China A-shares in relevant indices.
Growth stocks, particularly in the information technology sector, delivered the strongest returns in the first quarter. Healthcare and financial sectors were the laggards.
Government and corporate bonds advanced as central banks signalled low interest rates would likely be maintained for a longer period due to disappointing economic data and low inflation in key regions. Corporate bonds outperformed government bonds during the period, with high-yield corporate bonds having their strongest quarter in years.
The price of oil experienced a significant surge of over 30% in dollar terms, marking the largest quarterly advance since 2009. US sanctions against Iran and Venezuela, along with OPEC-led supply cuts, drove the price increase.
On the metals exchanges, iron ore, nickel, and zinc prices all rose by over 20% during the quarter, reaching multi-year highs. Vale SA ADR, the world's largest iron ore miner, temporarily shut down production at some sites following a mining-waste dam disaster that resulted in numerous fatalities.
Super 60 funds continued to perform in line with expectations, both in absolute and relative terms, delivering positive returns year-to-date, except for the iShares Physical Gold ETC GBP.
In the first quarter, Fidelity China Special Ord was the best-performing fund, up 21%. Other funds that displayed strong performance over various periods included Fundsmith Equity, Baillie Gifford Shin Nippon Ord, iShares Core MSCI World ETF GBP H Dist, and Scottish Mortgage Ord. However, it's important to note that quarterly performance numbers only provide a snapshot and should be considered within the context of long-term investment goals.
