Global economic growth is decelerating, with the Europe and China falling first while, according to Natixis Investment Management, the US and Japan have remained resilient, prompting Money Management to look into to the top funds in each region and compare performance data.
Natixis’ chief market strategist, David Lafferty, said for now, China’s slowdown was largely by design, and was an effort to rein in credit growth.
“However, manufacturing and export weakness indicate that trade tensions may be taking a larger toll,” he said. “This puts Xi [Jinping] in a position to negotiate, but the Chinese will not ‘give away the store’. We see no definitive outcome in 2019.”
Europe’s slowdown however, according to Lafferty, is more troubling as Italy is entering a recession, Germany is on the verge, France fights social unrest and Brexit is causing commotion in the UK.
Looking at the US, the risk of a US or global recession in 2019 is at 30 per cent, which, while is significant, is less than a one in three chance.
“Most of our optimism is rooted in the relative strength of the US consumer in light of rising wages, solid job creating and still-low unemployment.”
For now, US leading indicators remain positive according to the chief market strategist, but their upward trajectory has slowed.
“We are watching consumer trends, which at the margin, have been weakening a bit, including growing delinquencies,” said Lafferty.
Looking at FE Analytics, it’s clear North American equities lead the way in terms of performance, with the sector average sitting at 9.43 per cent for the 12 months to 1 February, 2019. The region holds a heavy lead over the next-best global sector, European equities, which returned, on average, -2.33 per cent
The Asia Pacific ex Japan sector returned -3.22 per cent for the same time period, with the Asia Pacific Single Country sector sitting bottom at -7.01 per cent.
BetaShares’ NASDAQ 100 ETF was the top returning fund for the period, with 15.00 per cent returns, followed by VanEck’s Vectors Morningstar Wide Moat ETF, which returned 14.83 per cent. In fact, most of the top funds in the sector were exchange-traded funds, which suggests the market in the US has primarily driven performance.
The top European fund, the Pendal European Share fund, returned -0.30 per cent, which sets the scene for the European market. Performance of Asian funds sat somewhere between Europe and the US with the top Asia Pacific Single Country fund, Fidelity China, returning 4.06 per cent, while the top Asia Pacific ex Japan fund, CFS Asian Growth, returning 6.49 per cent.
The chart below tracks the performance of the regional equity sectors from 1 January 2018 to 1 February 2019.
