FTSE and US shine in tough month for Latam

The FTSE 100 and North American funds were the stand-out market performers in May, but Latin American funds struggled as a confluence of factors hit Brazil’s economy hard.

According to figures compiled by Shore Financial Planning using data from FE, the FTSE 100 was the best-performing market in May with a 2.65% return on the back of continuing sterling weakness.

The FTSE All-Share was a close second, posting a return of 2.6% for the month, followed by the S&P 500 with 2.07%.

“Risk assets appeared to take a tumble in May, however the UK market was saved by sterling’s weakness with the pound falling 3.55% versus the dollar and more against the yen,” said Shore Financial Planning director Ben Yearsley (pictured).

But Yearsley said Bank of England governor Mark Carney had failed to take the opportunity on 9 May to raise rates from the original emergency low.

He said: “If the storms hit, there will be nothing in Carney’s armoury to bail the UK out.”

North America shines

North American Smaller Companies was the top-performing sector with a return of 9.23%, followed by Tech and Telco with 8.76% and North America with 6.04% (see table 3 below).

In addition, seven of the top 10 best-performing funds were US focused and the other three were what Yearsley termed “quasi-US” funds (see table 1 below).

The Baillie Gifford Global Discovery topped the best-performing funds list with a 13.8% return, followed by Baillie Gifford American with 12.54% and the MFM Techinvest Technology fund with 11.94%.

Yearsley said: “From a fund perspective it was a great month to be American. Seven of the top-10 best performing funds were US, and the other three are quasi-US funds as two were tech and one is tech-heavy. Unsurprisingly, both US sectors, along with technology, were at the top of the fund sector charts.”

Latam struggles

The MSCI Emerging Markets index fell 2.25% over the month as the Brazilian economy was hit hard by a lorry drivers’ strike, the rising oil price and the falling real.

Latin American funds in particular took a battering during May with six of the 10 worst-performing funds coming from the region (see table 2 below).

The second-worst performing fund of the month was the Threadneedle Latin America fund with a return of -11.29%. This was closely followed by the Aberdeen Latin America fund with -11.22%, the Invesco Perpetual Latin America (-10.93%) and the Scottish Widows Latin America fund (-10.87%).

Bad month for bonds

Elsewhere, bonds dominated the top 10 worst-performing sectors (see table 4 below).

The Sterling High Yield sector delivered the worst return of the month with -0.83%, followed by the Global Emerging Market Bond and Global Emerging Market sectors, with returns of -0.49% and -0.45% respectively.

Elsewhere in the list, Sterling Strategic Bond, Sterling Corporate Bond and Global Bonds failed to impress, delivering returns of -0.26%, -0.1% and 0.23% respectively.

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