US funds back in the spotlight, but should you buy?

Saltydog investor made no changes to his portfolio last week, although he is ready to act.

After last year’s ‘coronavirus crash’, the market recovery was led by the US and the large technology stocks in particular. The Nasdaq index went up by over 40% in 2020, even though it lost 14% in the first quarter.

The UK markets fell further and did not bounce back as quickly, however they have performed better in recent months. Last week, the FTSE 100 closed above 6,900 for the first time since February 2020, and the FTSE 250 has recently broken through 22,000 for the first time in its history.

Each week, we look at the performance of the Investment Association (IA) sectors over various different time periods. We focus on the four-week return as an early indicator that a trend is beginning to form.

At the beginning of the year, the best-performing sector, based on its four-week return, was UK Smaller Companies.

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Towards the end of January, the China/Greater China sector took the lead and remained in the top spot all the way through February. The UK equity sectors continued to perform reasonably well, and by March were dominating the tables again. Throughout March the UK Equity Income sector had the best four-week returns, but the UK All Companies and UK Smaller Companies sectors were never far behind.

Where we invested our demo funds

Our demonstration portfolios started investing in funds from the UK equity sectors in November, when this trend first emerged. We currently hold these funds: Artemis UK Select, Schroder Income, Franklin UK Smaller Companies, Premier Miton UK Smaller Companies, Marlborough Nano Cap Growth and FP Octopus UK Micro Cap Growth.

In last week’s analysis, the UK equity sectors were still looking good, but others had done slightly better.

The UK Smaller Companies sector was showing a 4.0% four-week gain, UK All Companies was up 2.5% and UK Equity had made 2.3%. However, in the lead was the combined North America and North American Smaller Companies sector, up 5.2% followed by Global Equity Income, up 4.7%.

The Technology and Telecommunications sector had the best one-week return, gaining 3.4% and lifting its four-week return up to 4.7%.

As well as providing our members with performance data on the IA sectors, we also highlight the leading funds over four weeks and 26 weeks.

In the North America and North American Smaller Companies sectors, we have now identified five funds that have gone up by over 40% in the last six months.

Another fund that caught our eye was the Marlborough Technology fund which has gained 9.9% in four weeks and over 55% in 26-weeks.

We did not make any changes to our portfolios last week. The American and Technology sectors have only just started to outperform the UK equity sectors over four weeks, and this could easily be another false dawn. However, if this trend continues then we look forward to rebalancing the portfolios to take advantage.

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For more information about Saltydog, or to take the two-month free trial, go to www.saltydoginvestor.com.