Q1 2020
The first quarter of 2020 will be remembered as one of the most challenging periods in global financial markets. The outbreak of the COVID-19 pandemic led to widespread economic shutdowns and caused significant disruptions in various sectors.
Stock markets experienced a sharp decline during this period, with major indices like the S&P 500 and FTSE All Share falling by 14% and 25%, respectively. Emerging markets were also heavily impacted, delivering a negative return of 18%. Energy stocks were hit the hardest, while sectors like utilities, information technology, and consumer staples showed more resilience.
The pandemic had a particularly negative impact on small and mid-cap stocks, which underperformed their larger counterparts. Dividend cuts and suspensions became prevalent among UK companies as they sought to conserve cash in the face of uncertainty.
Investors flocked to safer assets, driving government bonds to the top spot and leading to strong returns of nearly 10%. High-yield bonds, on the other hand, experienced a negative return of 8%. Gold emerged as the best-performing alternative asset class, acting as a safe haven for investors.
Commodities, especially oil, suffered significant losses due to decreased demand and oversupply. UK real estate investment trusts (REITs) were also heavily affected, with negative returns of 27% amid political risks and the impact of the pandemic.
Among the top-performing funds in the first quarter were iShares Physical Gold ETC GBP, M&G Global Macro Bond, Vanguard UK Government Bond Index, and Vanguard Global Bond Index. However, many equity-focused funds, particularly those focused on smaller companies and value strategies, experienced substantial losses.
Over a longer-term horizon, funds like Legg Mason IF Japan Equity, Scottish Mortgage, and Fundsmith Equity stood out, delivering annualized total returns exceeding 15%.
Despite the challenging environment, a significant portion of the active portfolios on the Super 60 list demonstrated above-average performance against their peer groups over a five-year period.
In summary, the first quarter of 2020 was marked by significant market volatility and widespread disruptions caused by the COVID-19 pandemic. While certain sectors and asset classes experienced significant losses, others, such as government bonds and gold, provided a safe haven for investors. It is crucial to carefully assess investment strategies and maintain a diversified portfolio during such uncertain times.
