Amidst all the market turmoil of 2016, some very serious money has been made if you have been invested in the right asset class.
Gold bullion is up 22.6% year to date but gold shares, as measured by the FTSE Gold Mines index, are up 85.1%*. Emerging markets have also done well, with the MSCI Emerging Markets up up 13.6%** in the first six months of 2016.
Individual funds in these markets have done even better. The best performing Elite Rated fund, BlackRock Gold & General, has returned more than 100%** for investors since the start of the year. It is followed by the Aberdeen Latin American fund, which is up 41.4%**. Both funds were ahead in March and have continued to outperform.
2016 leader board of Elite Rated funds
In contrast, developed markets have struggled. In sterling terms, the UK and European markets have been in negative territory for most of the year, as was Japan until the Brits voted to leave the EU, when the market jumped up by around 10% helping it to end the first half up around 6%.
The US market has done even better in sterling terms, with the returns from the S&P 500 again getting a boost post-Brexit as the pound weakened markedly against the dollar. It finished the period up almost 11%.
We expected 2016 to be volatile and, so far, the markets haven’t disappointed. Indeed, the second half of the year is likely to be much the same, as the uncertainties in the world have only increased post-Brexit.
Gold has come into its own as investors have flocked to it as a perceived safe haven and, whilst returns have been spectacular in the first half of the year, and the easy money has been made, I still believe that there is more to come, albeit at a slower rate. The precious metal and its related mining shares have had a dire few years and I believe they were oversold in that time. As market volatility prevails, gold’s price could rise further.
Emerging markets are more of a conundrum. They too have suffered in recent years as a strengthening dollar has taken its toll. As the dollar has stabilised, emerging markets have breathed a sigh of relief, but I don’t think this explains the returns we have seen in 2016.
Is the tide turning? I’m undecided. China is still slowing and the global economy is likely to take a hit from weaker sentiment in post-Brexit fall out. But it might be worth dipping a toe back in as the prospects for developed market equities are looking muted in the short term at least.
Broadly speaking, I continue to be cautious. As always, however, as the year progresses, there are bound to be some areas that offer the potential for good returns.
*Source BlackRock, 29th June 2016, total returns in dollars.
**Source: FE Analytics, 1st January 2016 – 27th June 2016, total returns in sterling.