What’s Hot, What’s Not: Europe Hot, Asia and Linkers Not [Sector Edition]

Fri 03 Mar 2023

By James Newstead

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What's Hot What's Not

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What’s Hot

  • The theme among our big hitters this month is fairly simple, Europe up (UK included).
  • Cheap European small-caps attracted buyers, ignoring recessionary concerns. 
  • UK Equity Income notably outperformed the broader UK market, as that sector tends to have a Value-style bias. This includes sectors that tend to outperform during high inflation, like energy, commodities, and consumer staples.

What’s Not

  • The China sector struggled this month. After a 35%+ run from late October to late January, thanks to China’s unlocking, though just in the last week it may have bottomed.
  • This “breather” stretched across to other China influenced sectors in Asia and Emerging Markets.
  • More concerning is that “Linkers” or UK Index Linked Gilts feature yet again…
  • as we have said many times, what often appears “safe” is sometimes nothing of the sort, and particularly so at the end of a 40-year cycle of falling inflation. This is made very obvious by the chart below, depicting the FTSE 100 and S&P 500 vs Vanguard’s UK Inflation Linked Gilt fund during its meltdown last year.

 

ftse s&p vanguard

 

What’s Hot

Name

Last Month’s Performance %

European Smaller Companies

2.42

Europe Excluding UK

2.13

UK Equity Income

1.93

UK All Companies

1.63

Europe Including UK

1.24

 

What’s Not

Name

Last Month’s Performance

China/Greater China

-7.38

UK Index Linked Gilts

-5.82

Asia Pacific Excluding Japan

-4.69

Global Emerging Markets

-4.11

Asia Pacific Including Japan

-3.61

 

Performance 01/02/2023 – 28/02/2023

All performance figures quoted as total return in GBP 

                                          

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What's Hot What's Not

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